2.1 Demand

Question 1

Demand

Answer 1

How much is a consumer willing to pay for a good/service at that given price at that time.

Question 2

Diminishing Marginal Utility

Answer 2

The added benefit of consuming one more unit of good/service decreases as consumption increases.

Question 3

Law of Demand

Answer 3

As the price of a good decreases the demand for that good increases. Price and demand have an inverse relationship.

Question 4

Assumption about law of demand

Answer 4

The income effect: A decrease in price of goods/services being consumed, consumers experience increase in real income, allowing for them to purchase more of product.

The substitution effect: Price of good/services decrease(relative to other products), then people will buy more since marginal utility ratio improved. Since price is lower people will substitute goods because price of good decreases.

Question 5

Change in demand

Answer 5

price of good stays the smae but demand for it increases/decreases.

1. change in income:
   - normal good: as income increases demand increases.
   - inferior good: as income increases demand decreases(normally cheaper alternatives to higher quality goods)
2. Chnage in taste/prefrences
3. expectations of future prices
4. price of complments/substitutes(inverse relationship for substitute) (direct relation for compliments)
   - substitute goods: demand for one good increases when price of another good increases)
   - complementary goods: goods used in combination with each other
   - increase price in one good, demand decreases for other.
5. number of consumers on the market changed

Question 6

CHANGE in quanity demanded

Answer 6

amount of goods/services people will buy as particular price at particular time

1. change in income

Question 7

Shift vs movement on demand curve

Answer 7

change in quanity demanded due to price = movement

change in demand due to non-price factors= shift the entire curve.