Ch-theory Of Demand Flashcards
What is the definition of demand in economics?
Demand is the quantity of a good or service that consumers are willing and able to purchase at different prices.
What does the law of demand state?
The law of demand states that, all else being equal, as the price of a good decreases, the quantity demanded increases, and vice versa.
True or False: Demand can exist without the ability to pay.
False
What is a demand schedule?
A demand schedule is a table that shows the quantity demanded of a good at various prices.
What is the difference between a change in demand and a change in quantity demanded?
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.
Fill in the blank: The demand curve typically slopes ______.
downward
What factors can cause a shift in the demand curve?
Factors include changes in consumer income, tastes and preferences, prices of related goods, expectations of future prices, and the number of buyers.
What is meant by ‘complementary goods’?
Complementary goods are products that are consumed together, where the demand for one increases when the price of the other decreases.
What is a substitute good?
A substitute good is a product that can replace another; when the price of one rises, the demand for the other typically increases.
True or False: An increase in consumer income will always lead to an increase in demand.
False
What does a rightward shift of the demand curve indicate?
A rightward shift indicates an increase in demand at all price levels.
What does a leftward shift of the demand curve indicate?
A leftward shift indicates a decrease in demand at all price levels.
Short Answer: What is the effect of consumer expectations on demand?
If consumers expect prices to rise in the future, current demand will increase; if they expect prices to fall, current demand may decrease.
Fill in the blank: The term ______ refers to the maximum amount a consumer is willing to pay for a good.
reservation price
What is the concept of ‘elasticity of demand’?
Elasticity of demand measures how much the quantity demanded of a good responds to changes in price.
True or False: If demand is elastic, a price increase will lead to a proportionally larger decrease in quantity demanded.
True
What is meant by ‘perfectly inelastic demand’?
Perfectly inelastic demand means that quantity demanded does not change regardless of price changes.
What is the formula for calculating price elasticity of demand?
Price elasticity of demand = (% Change in Quantity Demanded) / (% Change in Price)
Short Answer: How does advertising affect demand?
Advertising can increase demand by enhancing consumer awareness and preference for a product.
What role does consumer preference play in determining demand?
Consumer preference influences the desirability of a product, thereby affecting the quantity demanded at various prices.
Fill in the blank: Goods for which demand increases as income increases are called ______ goods.
normal
What are inferior goods?
Inferior goods are those for which demand decreases as consumer income rises.
True or False: The demand for luxury goods is generally more elastic than the demand for necessities.
True
What does the term ‘market demand’ refer to?
Market demand is the total quantity of a good that all consumers in a market are willing to purchase at various prices.
Short Answer: How does the number of buyers affect demand?
An increase in the number of buyers in a market typically leads to an increase in demand.
