2.2 Demand

Question 1

Competitive market

Answer 1

composed of large numbers of sellers and buyers acting independently, so that no one individual seller or small group of sellers has the ability control the price of the product sold.

Question 2

What is demand?

Answer 2

Indicates the various quantities of a good the consumer is willing and able to buy at different possible prices during a particular time period, ceteris paribus.

Question 3

What is market demand?

Answer 3

the sum of all individual demands for a good.

Question 4

law of demand

Answer 4

there is a negative relationship between the price of a good and its quantity demanded over a particular time period, ceteris paribus.

Question 5

What are the non-price determinants of demand?

Answer 5

1. Income
2. Tastes and preferences
3. Population size and demographics

Question 6

What are inferior goods?

Answer 6

Goods which demand varies inversely with income.

Question 7

What are normal goods?

Answer 7

Goods which demand varies directly with income.

Question 8

What are substitute goods?

Answer 8

Goods that satisfy a similar need

Question 9

Complementary goods

Answer 9

Goods in joint demand, used together to satisfy particular wants.

Question 10

law of diminishing marginal utility

Answer 10

As the consumption of a good increases, the extra utility the consumer receives from each additional unit consumed decreases.

Question 11

What is the substitution effect?

Answer 11

When the price of a product falls, then the product will become cheaper in relation to other goods, causing quantity demanded to increase.

Question 12

What is the income effect?

Answer 12

When the price of a product falls, the consumers’ real income increases so the quantity demanded of the product increases.