4-Demand

Question 1

Define Demand

Answer 1

willingness and ability to buy goods over a given price over a given time period

Question 2

Law of Demand

Answer 2

Price ↓ Demand ↑
Price ↑ Demand ↓

Question 3

Define Rational Consumer

Answer 3

They will aim to maximize utility

Question 4

Define Marginal Utilit

Answer 4

Satisfaction gained from an extra unit of product

Question 5

Define Diminishing Marginal Utility (DMU)

Answer 5

successive unit consumed = Marginal utility falls

Question 6

Why dopes the demand slope downwards?

Answer 6

Due to DMU, consumers will pay less for more goods.
∴ Inverse relationship between price and quantity demanded

Question 7

What causes a Movement Along the Demand Curve?

Answer 7

Movement occurs due to changes in Price ONLY

Question 8

What causes a Shift of the Demand Curve?

Answer 8

Shift occurs due to changes in any factor other than price

Question 9

Factors that cause a Shift in the Demand Curve

Answer 9

–> Real Income
–> Taste and Preference
–> Fashion
–> Size and age distribution of population
–> Increase in population > Immigration
–> Age distribution > aging / younger population
–> Advertising
–> Price of substitute
–> Eg- tea and coffee
–> Speculation
–> Price of complementary goods
–> Eg- Car and petrol