2.1 - Demand

Question 1

Market

Answer 1

Where people who are able to purchase a good, service, or resource can exchange with those who are able to provide that same good, service, or resource.

Question 2

Product market:

Answer 2

where goods and services are sold

Question 3

Factor market

Answer 3

where resources are sold

Question 4

Labour market:

Answer 4

where people offer services in exchange for a salary

Question 5

Financial market:

Answer 5

where foreign currencies, company shares, or other financial contracts are traded.

Question 6

Competition occurs when

Answer 6

there is a large number of buyers and sellers acting independently

Question 7

Markets are considered free and competitive when

Answer 7

private individuals and firms are free to decide what they buy and sell and at what price

Question 8

Freely competitive markets encourage

Answer 8

sellers to meet consumers needs and wants through the quality and price of their goods. ( opposite of market power)

Question 9

Free markets allow

Answer 9

consumers to have more choices

Question 10

Demand

Answer 10

is the quantity of a good or service that consumers are willing and able to purchase at various prices during a certain time period.

Question 11

Effective demand

Answer 11

the quantity of goods and services that consumers are actually buying at various prices, supported by their ability to pay

Question 12

Individual demand:

Answer 12

Demand of one person for a product

Question 13

Market demand:

Answer 13

is the sum of all individual demands for a product at every price

Question 14

Law of demand:

Answer 14

as the price of a product decreases, the quantity demanded of it will increase
-there is an inverse relationship between price and quantity demanded.

Question 15

Assumptions behind law of Demand:

Answer 15

• Human behaviour and nature
• Income effect
• Substitution effect
• Law of diminishing marginal utility:

Question 16

Non-Price determinants of demand:

Answer 16

All factors that influence demand other than price

Question 17

Demand

Answer 17

Entire demand curve of a good or serve

Question 18

Quantity demanded:

Answer 18

a specific quantity purchased by consumers at a specific price

Question 19

Movement along demand curve:

Answer 19

When the price of a good changes, we see movement along the demand curve.

Question 20

Shift in demand curve:

Answer 20

A change in the non-price determinant will shift the whole demand curve.

Question 21

Normal goods:

Answer 21

Goods whose demands increase as people’s incomes increase

Question 22

Inferior goods:

Answer 22

Goods whose demand decreases as people’s income increases.

Question 23

Substitute goods:

Answer 23

Goods that have similar characteristics and uses for consumers

Question 24

Close substitutes:

Answer 24

goods that have v similar characteristics and uses (coke v pepsi)
- Shift in demand curve is greater

Question 25

Remote substitutes

Answer 25

goods that have more different characteristics (coffee v juice)

Question 26

Complementary goods:

Answer 26

goods that are consumed together

Question 27

Close complements:

Answer 27

goods that are consumed together (ink and pen)

Question 28

Remote complements:

Answer 28

goods that are sometimes consumed together but aren’t dependent on each other (sushi and soy sauce)

Question 29

Unrelated goods:

Answer 29

Change in price of one good will not affect demand of the other good.

Question 30

Non-price determinants of demand:

Answer 30

• tastes and preferences
• future expectations
• number of consumers
• Seasonal changes
• Change in price of complements/substitutes