2.2 Demand

Question 1

Demand

Answer 1

The willingness and ability to purchase a good or service at the given price point in a given time period

Question 2

Law of demand

Answer 2

The quantity demanded varies inversely with it’s price

Question 3

What way do demand curves slope

Answer 3

DOWN

Question 4

Individual demand

Answer 4

The demand for a good or service by an individual consumer

Question 5

Market demand

Answer 5

The total demand for a good or service found by adding together all the individual demands

Question 6

Movement along the demand curve

Answer 6

When the price changes, leading to movement up or down the existing supply curve

Question 7

Shift of the demand curve

Answer 7

When the entire demand curve moves outward (right) or inward (left)

Question 8

What causes a shift in the demand curve (6)

Answer 8

• Income
• Marketing
• Tastes/ Fashion
• Substitutes/ complements
• Economic situation-
• Price expectations- if people expect prices to rise demand will be high noe

Question 9

What causes a movement along the demand curve

Answer 9

A change in price

Question 10

What is a positive movement along the demand curve

Answer 10

An expansion

Question 11

What is a negative movement along the demand curve

Answer 11

A contraction

Question 12

What is price elasticity of demand

Answer 12

The responsiveness of quantity demanded to a change in price of a product

Question 13

If PED is elastic, what is the value of the PED

Answer 13

-1 to -infinity

Question 14

If PED in inelastic, what is the value of PED

Answer 14

0 to -1

Question 15

If the PED is unitary elastic, what is the value of PED

Answer 15

-1

Question 16

Elastic Demand

Answer 16

When the percentage change in quantity demanded is greater than the percentage change in price

Question 17

Inelastic Demand

Answer 17

When the percentage change is quantity demanded is smaller than the percentage change in price

Question 18

How do you calculate PED

Answer 18

Percentage Change in Quantity Demanded/
Quantity Change in Price

Question 19

If a good is PED perfectly elastic, how will the demand curve look like

Answer 19

Horizontal

Question 20

If a good is PED perfectly inelastic, how will the demand curve look like

Answer 20

Vertical

Question 21

What are the effects of PED on consumers (3)
T, CP, DIn

Answer 21

• They could be affected by high levels of taxation of products they wish to buy e.g. Alcohol, Tobacco and motor fuel as consumers have inelastic demand
• Succeptible to changes in prices for goods/ services which producers know will have a higher demand. e.g Can charge more for an earlier train ticket because demand is inelastic
• If demand is inelastic, consumers are often willing to pay more for a good/ service

Question 22

What are the effects of PED on producers (3)

Answer 22

• Can use their knowledge of PED to increase their total revenue. E.g. if they had elastic PED, they could decrease prices to increase total revenue
• Producers could charge different prices to different parts of their market e.g rail companies charging more to people who need to travel during peak times, as they have inelastic demand as they have to get to work
• Producers of raw materials have inelastic demand, so if there is an increase in supply (an abundant harvest), their price would decrease and revenue would fall. Equally if there is a decrease in supply, price would increase and revenue would increase, thus leading to more profit.