Theme 1.2 - Demand

Question 1

Define Demand

Answer 1

Quantity of good or service that consumers are willing or able to buy at a given price within a time period

Question 2

What are the 3 types of demand?

Answer 2

Effective
Latent/Potential
Derived

Question 3

What is effective demand?

Answer 3

Consumers have desire to buy + are willing to pay

Question 4

What is latent/potential demand?

Answer 4

Consumers have desire but lack spending power
Highly sought after by businesses

Question 5

What is derived demand?

Answer 5

Demand for product x linked to demand for related product y
E.g., Demand for cars rises, demand for steel rises

Question 6

How do you infer increased demand from the demand curve?

Answer 6

Curve moves up + right

Question 7

How do you infer decreased demand from the demand curve?

Answer 7

Curve moves down + left

Question 8

What are the primary causes of a shift in the demand curve?

Answer 8

Income
Price of other goods
Population change
Changing trends
Changing legislation
Advertising
Changing interest rate

Question 9

How does income affect demand?

Answer 9

More/Less people have, More/Less they can buy

Question 10

How do the prices of other goods affect demand?

Answer 10

Complements - Fall in price x, rise in demand y
Subs - Rise in price x, rise in demand y

Question 11

How does population change affect demand?

Answer 11

Increase/Decrease results in itself

Question 12

How do changing trends affect demand?

Answer 12

Products become more/less desriable

Question 13

How does changing legislation affect demand?

Answer 13

Incentivise/Punish behaviour

Question 14

How does advertising affect demand?

Answer 14

Influences consumer choice
Makes products seem more marketable

Question 15

How does a changing interest rate affect demand?

Answer 15

Products bought on credit with borrowed money become sensitive to interest rate
Saving incentivised