1.2.2 Demand

Question 1

What is demand ?

Answer 1

This is when you are both willing and able to buy a g/s for a specific price

Question 2

When we assume Ceteris paribus and price goes up and down what happens to demand ?

Answer 2

When price goes down it causes an extension in demand.

When price goes up it causes a contraction in demand.

Question 3

What are the factors that affect demand ?

Answer 3

PASIFIC
Popoulation
Advertising 
Substitute price 
Income 
Fashion/taste
Interest rate 
Complement price

Question 4

What is the PED ?

Answer 4

This measures how quantity demanded responds to a change in price

Question 5

What does it mean if PED is bigger than one ?

Answer 5

Demand is price elastic. This means when there is a change in price consumers are very responsive. Therefore percentage change in QD is greater than percentage change in P

Question 6

What does it mean if PED is smaller than one ?

Answer 6

Demand is price in elastic. This means when there is a change price consumers are unresponsive. A percentage change in price leads to a small percentage change in QD

Question 7

What does it mean when PED is equal to -1 ?

Answer 7

Percentage change in QD is the same as Percentage change in P

Question 8

How do you draw elastic and perfect elastic demand ?

Answer 8

It is a horizontal line. Example of perfect elastic demand is paper clips on eBay

Question 9

How do you draw in elastic and perfectly inelastic demand ?

Answer 9

Draw a vertical line. An example of a perfect inelastic good are life saving drugs who needs them to live or addictive drugs

Question 10

How do you draw unitary elastic demand ?

Answer 10

It looks like AFC and is a curvy upside down right angle

Question 11

What factors affect PED ?

Answer 11

NASBIT
Necessity 
Addiction and habit 
Substitute 
Brand loyalty 
Income
Time period