1.2.1 Demand

Question 1

Demand

Answer 1

The number of consumers willing and able to purchase a good or service at a given price.

Question 2

The demand curve

Answer 2

The relationship between price and quantity demanded can be shown using a demand curve.
The demand curves shows the quantity demanded for a good, at any given price, over a period of time.

As price falls, quantity demanded rises.
As price rises, quantity demanded falls.

Inverse relationship

Question 3

Complementary goods

Answer 3

Bought in conjunction with each other, such as eggs and bacon or cars and petrol.

Question 4

Luxury goods

Answer 4

Ones for which sales rise rapidly when people ar better off, but fall rapidly in hard times.

Question 4

Normal goods

Answer 4

Ones for which sales move in line with changes in consumer incomes.

Question 5

Inferior goods

Answer 5

Ones for which sales fall when people are better off, but rise when consumers are struggling financially.

Question 6

Substitutes

Answer 6

Products or services in competition with each other, so customers will substitute one for the other.

Question 7

Shifts in the demand curve

Answer 7

A movement along a demand curve occurs when there’s a change in price.

A change in any factor other than price is shown by a shift in the demand curve.

An increase in demand - shifts to the right.
A decrease in demand - shifts to the left.

Question 8

Determinants of demand

Answer 8

1. Tastes (consumer preferences)
   - The personal preferences which determine out tastes and therefore demand.
   - Change over time and influenced by factors such as fashion, experience, culture, mood, seasons etc.
2. Advertising or branding
   - Businesses influence demand by trying to change consumer tastes.
   - This will increase demand through awareness and loyalty.
3. Income
   - Normal goods: income rises we purchase more of these goods.
   - Inferior goods: Demand decreases as income increases.
4. Population
   - Size and age of distribution of a population can influence demand.
5. Substitutes
   - The alternatives to a good or service. If the price of good A increases, demand for good B will decrease.
6. Complementary products