Consumers Demand For Goods And Services

Question 1

What determines consumers demand for goods ?

Answer 1

Economic theory assumes that consumers will always prefer lower prices to higher prices (other things being equal, CETERIS PARIBUS)

Another important determinant if demand is INCOME

Widespread instances of unmet or suppressed demand because of income constraints

Different consumption pattens by different income groups in society

Question 2

What is Engels law ?

Answer 2

Engels law in economics shows that as consumers become wealthier, the share of budget expenditure accounted by food expenditure starts to decline

ABSOLUTE amount of money spent on food will continue to increase

Question 3

What are the other factors affecting consumers demand for goods ?

Answer 3

TASTES AND PREFERENCES are important in shaping the demand for a good

Lifestyle issues

Changing WORKING PATTERNS , settlement patterns

Question 4

What’s affect does RELATIVE PRICES have on demand ?

Answer 4

Consumer demand for a product also affected by RELATIVE PRICES

IE. Not only the price of the good itself but RELATED GOODS

Consumers are affected by price changes in SUBSTITUTE GOODS

Economic definition of a substitute good..

Rise in price of good X will lead to an increase in demand for good Y

Question 5

Graph of relationship between DEMAND for product and its PRICE

Answer 5

For