LS8 - Demand

Question 1

What does demand refer to?

Answer 1

The quantity of a good or service purchased at a given price over a given time period

Question 2

What is the law of demand?

Answer 2

Ceteris Paribus, as the price of a good increases, quantity demand decreases, and vice versa

Question 3

How does a decrease in price affect demand?

Answer 3

It creates an extension / expansion in demand

Question 4

How does an increase in price affect demand?

Answer 4

It creates a contraction in demand

Question 5

How do you represent extension / contraction of demand on a graph?

Answer 5

Movement along the demand curve

Question 6

What are substitute goods?

Answer 6

2 alternative products which can be used for the same purpose

Question 7

What are complement goods?

Answer 7

2 products which work together / are used together

Question 8

What factors affect demand?

Answer 8

Changes in income 
Price of substitute / complement goods
Population size
Advertising
Tastes / preferences

Question 9

How does population size affect demand?

Answer 9

If the population is higher, there will be more people who will demand the product, but if the population is lower then there will be less people who demand the product

Question 10

How does advertising affect demand?

Answer 10

Advertising can increase demand as it can influence more people to want the product

Question 11

How does taste / preference affect demand?

Answer 11

A product which appeals to more people with that preference has a higher demand as more people want the product

Question 12

How does changes in income affect demand?

Answer 12

A higher income will result in a higher demand as more people have the money to spend on products

Question 13

How would you show a change in quantity on a demand curve graph?

Answer 13

Move the curve in shifts

Question 14

What type of demand does the demand curve show?

Answer 14

Effective demand

Question 15

What is effective demand?

Answer 15

Demand which shows how much would be bought at any given price, and not how much consumers would buy if they had unlimited resources

Question 16

How does the number of substitute goods affect the demand of original goods?

Answer 16

If the number of substitute goods increases, then the demand of the original good decreases as there are more alternatives

Question 17

How does the number of complement goods affect the demand of the original good?

Answer 17

If the number of complement goods increases, then the demand of the original good increases as there is more reason for consumers to purchase the product as it works with the other complement good

Question 18

What is the law of diminishing marginal utility?

Answer 18

The value or utility that individual consumers gain from the last product consumed falls the greater the number consumed.

Question 19

What is consumer surplus?

Answer 19

The difference between how much buyers are prepared to pay for a good and how much they pay

Question 20

Why does the demand curve point downwards and right?

Answer 20

Because price and quantity demanded are inversely proportional