1.2.2 Demand

Question 1

Consumer goods and services

Answer 1

consumer goods and services help to satisfy our needs and wants directly

consumer durables: products that satisfy a steady floor of satisfaction/utility over their working life e.g. washing machine or using a smart phone.

Consumer nondurables: products that are used up in the act of consumption e.g. drinking a coffee or turning on the heating

Question 2

Demand

Answer 2

quantity of a good or service that consumers are willing and able to buy at a given price in a given period of time.

Question 3

Demand curve

Answer 3

Shows the relationship between the price of an item and the quantity demanded over a period of time

Question 4

Diminishing marginal utility

Answer 4

As consumption increases the satisfaction from each additional unit decreases

Question 5

Effective demand

Answer 5

Demand is only effective when a consumers desire to buy a product is backed up by an ability to pay for it

Question 6

Excess demand

Answer 6

The difference between the quantity supplied and the higher quantity demanded when price is set below an equilibrium price.

this will result in queueing and an upward pressure on price

Question 7

Law of demand

Answer 7

there is an inverse relationship between price and demand.
As prices fall we see an expansion of demand.
If price rises that should be a contraction of demand.

Question 8

Perverse demand curve

Answer 8

A demand curve which slopes upwards from left to right
An increase in price leads to an increase in demand.
This may happen when goods are strongly affected by price expectations.

Question 9

Willingness to pay

Answer 9

The maximum price a consumer is prepared to pay to obtain a good