Lesson 2

Question 1

What 3 things should you always think about in economic questions?

Answer 1

Households

Firms (businesses)

Government

Question 2

Benefit of high interest rates?

Answer 2

discourages borrowing

causing inflation to lower

Question 3

Demand

Answer 3

the ability and willingness of individuals to buy a good/service at a given price

Question 4

Individual demand

Answer 4

1 consumer’s willingness and ability to purchase a product at a given price

Question 5

Market demand

Answer 5

the sum of all consumers’ willingness and ability to purchase a product at a given price

Question 6

Joint Demand

Answer 6

When products are complements

e.g. if the demand for bread increases, the demand for butter will also increase

Question 7

Composite Demand

Answer 7

when a good has multiple uses

e.g. a phone can game but also be used as a calculator

Question 8

Competitive Demand

Answer 8

When products are substitutes of another

e.g. xbox and playstation

Question 9

What 4 factors effect demand?

Answer 9

Price

Income

Price of other goods (substitutes)

Preference

Question 10

Which of the 4 factors effecting demands is the odd one out?

Answer 10

Price because all others are non - price factors

Question 11

What type of relationship is between price and demand?

Answer 11

Inverse - as one rises, the other falls