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Question 1

What is demand

Answer 1

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

Question 2

What is the law of demand

Answer 2

The inverse relationship between quantity demanded and the price of a good or service, ceteris paribus

Question 3

What is diminishing marginal utility

Answer 3

An individual gains less extra satisfaction from consuming a product as each extra unit is consumed. This helps explain why demand curve is downward sloping. Meaning the consumer will be prepared to pay a progressively lower price for each additional unit of consumption.

Question 4

Why is demand curve downward sloping

Answer 4

There is an inverse relationship between the price and the quantity demanded

Question 5

For PCADC what would P-up QD-Down cause

Answer 5

Contraction in D

Question 6

For PCADC what would P-Down QD-Up cause

Answer 6

Extension in D

Question 7

Non price factors affecting demand

Answer 7

P-population-change in number and age distribution of potential buyers.
I-Income-change in income.
C-Complimentary goods- Change in price of the linked good.
T-tastes and preferences-changes towards/away.
S-substitute goods-change in price of a competing good.

PICTS

Question 8

What does population affect

Answer 8

The market size

Question 9

What is a normal good

Answer 9

A good where the quantity demanded increases in response to an increase in consumer income. (↑Y = ↑D),(↓Y = ↓D)

Question 10

What is a luxury good

Answer 10

A good where as income rises, consumers spend proportionally more on the good.

Question 11

What is necessity good

Answer 11

A good where as income rises, consumers spend proportionally less on good.

Question 12

What is an inferior good

Answer 12

A good where the quantity demanded decreases in response to an increase in consumer incomes. (↑Y = ↓D),(↓Y = ↑D)

Question 13

What is a complementary good

Answer 13

A good where an increase in the price of another good causes its demand to fall.

e.g increase in P of good A = decrease in D of good B
Decrease in P of good A = Increase in D of good B

Question 14

Example of complementary goods

Answer 14

Fish and chips, tennis balls and tennis rackets.

Question 15

As a result of tastes and preferences

Answer 15

Consumer are W and A to buy more or less of the good.

Question 16

what is a substitute good

Answer 16

A good where an increase in the price of another good causes its demand to rise.
e.g Increase in P of Good A= increase in D of good B
decrease in P of good A = decrease in D of good B

Question 17

Examples of Substitute goods

Answer 17

X-box and PlayStation, Burger king and MCD’s

Question 18

Picts

Answer 18

Shift-increase or decrease

Question 19

Price change

Answer 19

Along-Contraction or extension

Question 20

What is consumer surplus

Answer 20

The difference between the amount that consumers are willing to pay and the price that they actually pay

Question 21

Original consumer surplus is

Answer 21

APE

Question 22

Consumer surplus after price change

Answer 22

A,P1,E1

Question 23

What is the gain/loss

Answer 23

P,E,E1,P1

Question 24

Effects of habitual consumption

Answer 24

May lead to persistent behaviour and unresponsiveness to market changes.

Question 25

Effects of altruistic decisions

Answer 25

May mean consumers make socially responsible decisions

Question 26

Effects of herding behaviour

Answer 26

May mean consumers buy goods because others buy them

Question 27

Effects of impulse buying

Answer 27

Is where consumers suddenly purchase a good, when they had not previously planned it.

Question 28

What is supply

Answer 28

The quantity of a good or service that producers are willing and able to sell at any given price in a given time period.

Question 29

Non price factors affecting Supply curve

Answer 29

P-Production costs I-Indirect tax e.g Indirect tax-decreases, Costs/unit decreases= increase in supply N-number of firms-Increase in number of firms leads to an increase in number of suppliers= increase in supply T-technology-Increase in tech=higher productive efficiency= lower costs/unit=Increased supply. S-Subsidies- increase in subsidies= decrease in costs/unit- higher profit= increased supply.

Question 30

What is producer surplus

Answer 30

The difference between the amount producers are willing to sell a good for and the price they actually receive

Question 31

Original producer surplus

Answer 31

APE, above surplus curve

Question 32

What is market equilibrium

Answer 32

When the market price is where the quantity demanded is equal to the quantity supplied

Question 33

The equilibrium price is where

Answer 33

Demand and supply intersect

Question 34

Disequilibrium=

Answer 34

price too high-excess supply Price too low-excess demand