1.4 Demand

Question 1

Demand

Answer 1

Quantity consumers are willing and able to purchase at various prices, focused on what they can afford to buy.

Question 2

Demand curve

Answer 2

Demand Curve: Shows quantity demanded at each price, usually sloping downward (higher demand at lower prices).

Movement Along Demand Curve: A change in price leads to a movement along the curve (e.g., price drop extends demand, and price rise contracts it).

Question 3

Shift definition

Answer 3

A shift means demand changes due to factors other than price.

Question 4

Factors causing a shift in demand: price of substitutes

Answer 4

. Lower price of a substitute decreases demand for the original product.
. If a substitute product’s price falls, demand for it rises, reducing demand for the original.

Question 5

Factors causing a shift in demand: price of complements

Answer 5

. Goods used together (e.g., milk and cereal).
. Drop in a complementary product’s price increases demand for both (e.g., lower skiing accessory prices increase demand for skiing holidays).

Question 6

Factors causing a shift in demand: consumer income

Answer 6

. Normal Goods: Demand rises with income.
. Inferior Goods: Demand falls with income (e.g., generic brands).

Question 7

Factors causing a shift in demand: fashion tasted and preferences

Answer 7

Changes in trends and popular preferences can shift demand (e.g., more demand for bicycles due to cycling success stories).

Question 8

Factors causing a shift in demand: advertising and branding

Answer 8

Increased advertising can boost demand as businesses build brand recognition.

Question 9

Factors causing a shift in demand: demographics

Answer 9

Population Growth and Structure: Affects demand based on age, gender, geographic distribution, etc.
Eg. Aging population increases demand for healthcare services

Question 10

Factors causing a shift in demand: external shocks ( competition, government policies, economic climate, social and environmental factors)

Answer 10

. Competition: Entry of a new competitor can decrease demand for existing products.
. Government Policies: Taxes or legal changes can curb or increase demand.
. Economic Climate: Growth boosts demand; recession lowers it.
. Social and Environmental Factors: Trends like social media use and environmental concerns affect demand (e.g., electric cars).

Question 11

Factors causing a shift in demand: seasonality

Answer 11

Demand for some products changes by season or events (e.g., garden furniture in spring).

Question 12

Complementary goods

Answer 12

Definition: Products used together, where the demand for one affects the other (e.g., cars and car insurance).