3.1.4-3.1.6 the law of demand

Question 1

define the law of demand

Answer 1

as price increases, quantity demanded decreases.

as price decreases, quantity demanded increases.

creating an inverse relationship

Question 2

what happens in a contraction of demand

Answer 2

selling prices increase and quantity demanded decreases

Question 3

what happens in an expansion of demand

Answer 3

selling prices decrease and quantity demanded increases

Question 4

Non-price factors affecting demand

Answer 4

-change in disposable income Changes to disposable income

Successful advertising

The change in price of a substitute item

The change in price of a complementary item

Decreases to personal income tax

Seasonal changes

Trends

Interest rates

Question 5

explain the income effect

Answer 5

when the goods or service becomes more expensive or less affordable for most, fewer people have the necessary income available to spend on it, and so the quantity demanded contracts.

Question 6

explain the substitute affect

Answer 6

when the good or service becomes more expensive, buyers look for cheaper alternatives, so the quantity demanded contracts.

Question 7

what are movements up or down a demand curve caused by

Answer 7

a change in price

Question 8

what is the difference between a movement or shift of demand

Answer 8

A shift of demand refers to a change in the entire demand curve, caused by factors like changes in income, preferences, or the prices of related goods. This means that at every price level, the quantity demanded is different.

A movement along the demand curve happens when the price of the good itself changes, leading to a change in the quantity demanded. In this case, the demand curve doesn’t shift, but there is a change in the amount consumers are willing to buy