1.2 DEMAND

Question 1

What is a normal good in terms of price

Answer 1

Where if price rises, demand falls, vice versa/

ie negative correlation

Question 2

Whats rational choice theory

Answer 2

makes the assumption that all individuals make logical decisions that will maximise their personal benefit i.e. self-interest.​

Question 3

What is demand

Answer 3

amount of a good or service that consumers are willing and able to buy at any given price​

Question 4

What are the 5 factors of demand

Answer 4

-The price of the good​

-Consumer income​

-Prices of other goods and services​

-Consumer tastes and fashion​

-Other factors

1. advertising

​2. population changes,

3. competition level in market.

Question 5

What is a veblen good

Answer 5

Good where demand rises and price increases

Question 6

What is the reason behind veblen goods

Answer 6

Demand increases as price increases because of the increased status brought to a person for buying higher priced goods.

Question 7

Whats a substitute product

Answer 7

A substitute product (substitute) acts as an alternative, therefore creating competition.

Question 8

Whats a complementary product

Answer 8

are those that are often bought together

e.g. tennis rackets and tennis balls.​

Question 9

What is an inferior good in terms of income

Answer 9

demand decreases as incomes increase​

Question 10

What is a giffen good and why does demand act the way it does for this good.

Answer 10

Inferior goods where demand rose as consumer incomes increased
even if its inferior, because there is no close substitutes for it, and its a necessity.

Question 11

What product associated with snob effect

Answer 11

veblen goods

Question 12

What is ceteris paribus

Answer 12

ceteris paribus meaning all other factors remain the same

Question 13

Define quantity demanded mathematically

Answer 13

The quantity demanded of a good or service is said to be a function of (depends upon) all the above factors eg. consumer income. This can be shown mathematically:

qd = f (p, y, p of other goods/services, consumer tastes, all other factors)

qd = quantity demanded
f = is a function of
p = price
y = consumer income

Question 14

What is a normal good in terms of income

Answer 14

If income increases, demand will increase for that good.

ie positive correlation

Question 15

How is Consumer tastes or fashion a determinant of DEMAND

Answer 15

People’s tastes change over time and demand for fashionable products changes regularly.

If a product becomes more fashionable then they have an increase in demand.

Question 16

What are the 4 factors causing a shift in the demand curve

Answer 16

1. Changes in Consumer income
2. Changes in Fashion and taste
3. Changes in Price or availability of substitutes

4.Changes in Price or availability of complements

Question 17

What is utility

Answer 17

Utility is the satisfaction that an economic agent gains from consuming a good or service.

Question 18

What is Marginal utility

Answer 18

Extra satisfaction (or utility) gained from consuming an additional unit of a good or service

Question 19

What is Diminishing marginal utility

Answer 19

Diminishing marginal utility states that the marginal utility of a good or service consumed will decrease as we consume more

Question 20

What is the unit of measurement for satisfaction

Answer 20

Utils

Question 21

What is disutility

Answer 21

When there is no satisfaction but theres dissatisfaction.

Question 22

define effective demand

Answer 22

Only if demand for a product is backed by a willingness and ability to pay