Ch-theory Of Demand

Question 1

What is the definition of demand in economics?

Answer 1

Demand is the quantity of a good or service that consumers are willing and able to purchase at different prices.

Question 2

What does the law of demand state?

Answer 2

The law of demand states that, all else being equal, as the price of a good decreases, the quantity demanded increases, and vice versa.

Question 3

True or False: Demand can exist without the ability to pay.

Answer 3

False

Question 4

What is a demand schedule?

Answer 4

A demand schedule is a table that shows the quantity demanded of a good at various prices.

Question 5

What is the difference between a change in demand and a change in quantity demanded?

Answer 5

A change in demand refers to a shift of the demand curve due to factors other than price, while a change in quantity demanded refers to a movement along the demand curve due to a price change.

Question 6

Fill in the blank: The demand curve typically slopes ______.

Answer 6

downward

Question 7

What factors can cause a shift in the demand curve?

Answer 7

Factors include changes in consumer income, tastes and preferences, prices of related goods, expectations of future prices, and the number of buyers.

Question 8

What is meant by ‘complementary goods’?

Answer 8

Complementary goods are products that are consumed together, where the demand for one increases when the price of the other decreases.

Question 9

What is a substitute good?

Answer 9

A substitute good is a product that can replace another; when the price of one rises, the demand for the other typically increases.

Question 10

True or False: An increase in consumer income will always lead to an increase in demand.

Answer 10

False

Question 11

What does a rightward shift of the demand curve indicate?

Answer 11

A rightward shift indicates an increase in demand at all price levels.

Question 12

What does a leftward shift of the demand curve indicate?

Answer 12

A leftward shift indicates a decrease in demand at all price levels.

Question 13

Short Answer: What is the effect of consumer expectations on demand?

Answer 13

If consumers expect prices to rise in the future, current demand will increase; if they expect prices to fall, current demand may decrease.

Question 14

Fill in the blank: The term ______ refers to the maximum amount a consumer is willing to pay for a good.

Answer 14

reservation price

Question 15

What is the concept of ‘elasticity of demand’?

Answer 15

Elasticity of demand measures how much the quantity demanded of a good responds to changes in price.

Question 16

True or False: If demand is elastic, a price increase will lead to a proportionally larger decrease in quantity demanded.

Answer 16

True

Question 17

What is meant by ‘perfectly inelastic demand’?

Answer 17

Perfectly inelastic demand means that quantity demanded does not change regardless of price changes.

Question 18

What is the formula for calculating price elasticity of demand?

Answer 18

Price elasticity of demand = (% Change in Quantity Demanded) / (% Change in Price)

Question 19

Short Answer: How does advertising affect demand?

Answer 19

Advertising can increase demand by enhancing consumer awareness and preference for a product.

Question 20

What role does consumer preference play in determining demand?

Answer 20

Consumer preference influences the desirability of a product, thereby affecting the quantity demanded at various prices.

Question 21

Fill in the blank: Goods for which demand increases as income increases are called ______ goods.

Answer 21

normal

Question 22

What are inferior goods?

Answer 22

Inferior goods are those for which demand decreases as consumer income rises.

Question 23

True or False: The demand for luxury goods is generally more elastic than the demand for necessities.

Answer 23

True

Question 24

What does the term ‘market demand’ refer to?

Answer 24

Market demand is the total quantity of a good that all consumers in a market are willing to purchase at various prices.

Question 25

Short Answer: How does the number of buyers affect demand?

Answer 25

An increase in the number of buyers in a market typically leads to an increase in demand.