Demand

Question 1

What is definition of demand ?

Answer 1

Demand is the quantity of a good/service consumers are willing and able to buy at a given price over a given period of time

Question 2

What is the substitution effect?

Answer 2

As prices increases other goods and services become relatively cheaper (become more price competitive). Consumers switch consumption. The demand contracts and quantity demanded decreases.

Question 3

What is the law of demand?

Answer 3

Price and quantity demanded have an inverse relationship. As price increases quantity demanded falls and vis versa (ceteris paribus)

Question 4

What is the income effect?

Answer 4

As prices increases our income now buys less of the given good or service. This leads to a contraction in demand and demand decreases

Question 5

What else affects demand? (Non price factors)

Answer 5

These cause shifts in demand and they are independent of price
- population
- advertising
- substitutes price
-income
-fashion/tastes
-interest rates
-compliments price

Question 6

What is consumer surplus?

Answer 6

Consumer surplus is the additional satisfaction (utility) gained by a consumer over and above the price paid for a products; it is the different between what a consumer is willing and able to pay fore a good/service and the price they actually pay

Question 7

What is joint demand?

Answer 7

Good which are interdependent/ demanded together e.g. iPhone and AirPods

Question 8

What is competitive demand?

Answer 8

Demand for good that are in competition e.g. trains to Wokingham and busses to Wokingham

Question 9

What is composite demand?

Answer 9

Demand for a good that has multiple uses demanded for several different uses e.g. electricity, gas, flour