2.2 Demand

Question 1

What is demand?

Answer 1

The quantities of a product that buyers are willing and able to buy at various prices per period of time, other things remaining the same

Question 2

What is notional demand?

Answer 2

Wanting something but not being able to actually get it

Question 3

What is effective demand?

Answer 3

Wanting something and actually being able to get it

Question 4

What is individual demand?

Answer 4

The sum of the demand of a single consumer

Question 5

What is market demand?

Answer 5

The sum of the demand by every consumer in a market

Question 6

What is the relationship between price and quantity demanded?

Answer 6

Inverse relationship. As the price of the product increases, the demand decrease. As the price decreases, the demand increases IN CETERIS PARIBUS!

Question 7

When would contraction occur on a demand curve?

Answer 7

When price increases so there will be movement up the demand curve

Question 8

When would expansion occur on a demand curve?

Answer 8

When price decreases so there will be movement down the demand curve

Question 9

What happens when the demand curve contracts?

Answer 9

Movement up the demand curve

Question 10

What happens when the demand curve expands?

Answer 10

Movement down the demand curve

Question 11

What are the three different types of demand and what do they each mean?

Answer 11

1. Joint demand: two or more goods/services are used together e.g. toothbrushes and toothpaste
2. Composite demand: goods are demanded for different purposes e.g. milk can be used for yoghurt, cheese etc.
3. Competitive demand: a good is purchased as an alternative to another good (substitute good) e.g. beef and pork

Question 12

What factors (determinants) influence demand for goods? aka shift the demand curve

Answer 12

1. Consumer income
2. Prices of other products
3. Consumer preferences and other cinluences (time
4. Price of the actual product itself

Question 13

What is disposable income?

Answer 13

Income that still includes inflation

Question 14

What is real disposable income?

Answer 14

Income with inflation taken off

Question 15

What is a normal good?

Answer 15

Goods where an increase in income leads to an increase in demand e.g. a holiday

Question 16

What is an inferior good?

Answer 16

Goods where an increase in income leads to a fall in demand e.g. the use of public transport

Question 17

How would the graph show a shifted increase in demand?

Answer 17

If the demand curve line moves to the right

Question 18

How would the graph show a shifted decrease in demand?

Answer 18

If the demand curve line moves to the left

Question 19

What are substitute goods?

Answer 19

Goods that compete with one another e.g. beef and pork

Question 20

What are complementary goods?

Answer 20

Goods for which there is joint demand, people consume them together e.g. toothbrushes and toothpaste

Question 21

How would the increase in the price of tea on the demand for coffee change the demand curve?

Answer 21

The demand for coffee will increase because tea is then more expensive than coffee (susbtitute goods) so the demand curve will shift to the right

Question 22

How would the increase in the price of tea on the demand for milk change the demand curve?

Answer 22

The demand for milk will decrease because tea will be more expensive to make (complementary goods) so the demand curve will shift to the left