2. Demand

Question 1

Demand

Answer 1

the amount of goods and services that consumers are willing and able to buy at a certain price over a certain period of time

Question 2

Law of demand

Answer 2

If D increases, P and Qd increase – proportional
If P increases, D and Qd decrease – inverse proportional

Question 3

graph the law of demand

Answer 3

…

Question 4

What does it mean when the D curve is completely linear?

Answer 4

That P and Qd are completely in equilibrium (which is not the case irl - D never actually meets S and vice versa).

Question 5

change in P or Qd results in…
change in D results in…

Answer 5

movement along the D curve
shift of the D curve

Question 6

2 types of demand determinants

Answer 6

1. price
2. non-price
   a) income
   b) price of other products
   c) preferences (on a personal level)
   d) future price expectations
   e) marketing (heavy advertising)
   f) number of consumers
   *government intervention (income tax)

Question 7

a) income (Y)

Answer 7

• (also income tax)
• increase in Y: normal goods – increase in D (increase in P in the long run - producers need time to adapt )
• increase in Y: inferior goods – decrease in D (more money, people can buy more expensive products)

Question 8

types of other products

Answer 8

i) substitute
- if there is an increase in P of one product there will be a decrease in Qd for that product and an increase in Qd demanded (D) of its substitute
ii) complementary goods
– proportional relationship (phones and chargers)
iii) unrelated goods
– no relationship

Question 9

d) future price expectations

Answer 9

– if P will rise in the future they will buy more of the product now (increase in demand)
- producers will decrease the supply because they’ll want to sell more later when the prices rise (shift of S to the left)

Question 10

f) number of consumers

Answer 10

– more consumers=greater demand (tourists – during summer)

Question 11

Change in income tax results in…

Answer 11

…change of income and demand (P changes when there is a change in VAT indirect tax).
- can also be changed by the syndicates exerting pressure on the government after being unsatisfied

Question 12

Price of money is the…

Answer 12

…interest rate (in banks), low interest rate = price of money is low.