Demand

Question 1

Demand

Answer 1

the quantity of a good or service that a consumer is willing and able to buy at each and every price level

Question 2

The law of demand

Answer 2

there is an inverse relationship between the price of a good and demand

Question 3

results of an increase in prices on the quantity demanded

Answer 3

contraction of quantity demanded

Question 4

results of a decrease in prices on the quantity demanded

Answer 4

expansion of quantity demanded

Question 5

result of change in price on a demand curve

Answer 5

movement along the line

Question 6

result of change in non-price determinants on a demand curve

Answer 6

shift inwards/outwards

Question 7

reasons for the inverse relationship/shape of demand curve

Answer 7

-income effect
-substitution effect
-the law of diminishing marginal utility

Question 8

income effect

Answer 8

a fall in prices increases the real purchasing power of consumers, allowing people to buy more with a given budget

Question 9

substitution effect

Answer 9

a fall in the price of one good makes it relatively cheaper compared to substitutes. some consumers will switch to this good, leading to higher demand

Question 10

the non-price determinants of demand

Answer 10

Population
Adverts
Substitute goods (price of)
Income
Fashion/trends
Interest rates
Complementary goods (price of)

Question 11

total utility

Answer 11

the total satisfaction from a given level of consumption

Question 12

marginal utility

Answer 12

the change in satisfaction from consuming an extra unit

Question 13

Normal goods

Answer 13

goods that experience an increase in demand due to an increase in income
e.g. new cars, designer clothes

Question 14

inferior goods

Answer 14

when following an increase in income, less of the good is purchased
e.g. own brand products, public transport

Question 15

derived demand

Answer 15

the demand for a factor of production used to produce another good or service

Question 16

composite demand

Answer 16

where goods have more than one use- an increase in the demand for one product leads to a fall in supply of the other

Question 17

Joint demand

Answer 17

when the demand for one product is directly and positively related to market demand for a related good or service . Two complements are said to be in joint demand

Question 18

competitive demand

Answer 18

when the demand for one product is directly and negatively related to market demand for a good or service. Two substitutes are said to be in competitive demand

Question 19

joint supply

Answer 19

where an increase or decrease in the supply of one good leads to an increase/decrease in supply of a by-product