Demand And The Demand Curve

Question 1

Demand definition

Answer 1

The quantity of a good or service consumers are willing and able to buy at a given price in a given time period

Question 2

What is the law of demand

Answer 2

There is an inverse relationship between price and quantity demanded

Question 3

Based on the law of demand, if price increases what happens to quantity demand

Answer 3

Decreases

Question 4

Based on the law of demand, if price decreases what happens to quantity demand

Answer 4

Increases

Question 5

What direction is a demand curve

Answer 5

Downward sloping

Question 6

What do you assume when the price changes

Answer 6

Ceteris Paribus

Question 7

What does Ceteris Paribus mean

Answer 7

All other factors remain unchanged/equal

Question 8

How does the income effect explain the fall in quantity demand when price rises

Answer 8

If prices rise, income can’t stretch as far meaning we are less able to buy goods and services

Question 9

How does the substitution effect explain the fall in quantity demand when price rises

Answer 9

If prices rise, other goods and services become more price competitive, leading to us switching demand to those goods

Question 10

What will non price factors do to demand

Answer 10

Shift demand

Question 11

What are non price factors

Answer 11

Population
Advertising
Substitutes price
Income
Fashion/tastes
Interest rates
Complements price