Demand

Question 1

What is demand

Answer 1

Demand for a good or service is the quantity that purchasers are willing and able to buy

Question 2

What is the general shift of demand when income increases

Answer 2

Demand shifts to the right as demand increases and income increases

Question 3

What is a normal good

Answer 3

A good that experiences an increase in demand due to the increase in income

Question 4

What is an inferior good

Answer 4

A good that experiences a decrease in demand when there is an increase in prices

Question 5

What happens to the demand for normal goods when income rises

Answer 5

Demand for normal good increase e.g. houses, cars, luxuries

Question 6

What happens to the demand for inferior goods as income increases

Answer 6

Demand for inferior goods decrease e.g. public transport, supermarkets ect

Question 7

What are substitutes

Answer 7

Goods that can be readily switched from one to another to perform the same job e.g butter and margarine

Question 8

What happens to the demand of one if the price of the other substitute increases

Answer 8

If the price increases for one, the demand for the other will increase

Question 9

What happens to the demand of one if the price of the other substitute decreases

Answer 9

If the price of one decreases the demand for that will increase and the demand for the other substitute will decrease

Question 10

What are complimentary goods

Answer 10

A good that is used in conjunction with another good e.g car and petrol, Xbox and games

Question 11

What happens to the demand of one complimentary good if the price of the other increases

Answer 11

The demand decreases, shifts left

Question 12

What happens to the demand of one complimentary good if the price of the other decreases

Answer 12

The demand increases, demand shifts right

Question 13

What are the 5 factors affecting demand

Answer 13

Changes in:
.income
.population
.fashion
.legislation
.advertising

Question 14

Define utility

Answer 14

A measure of the satisfaction that we get from purchasing and consuming a good or service

Question 15

Define total utility

Answer 15

The total satisfaction from a given level of consumption

Question 16

What is marginal utility

Answer 16

The change in satisfaction from consuming an extra unit

Question 17

define consumer surplus

Answer 17

the difference between the amount that consumers are willing and able to pay for a good or service and the amount they actually pay

Question 18

where is the consumer surplus on a graph

Answer 18

the triangle above the market average

Question 19

what is derived demand

Answer 19

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

Question 20

is labour a derived demand in a free market economy

Answer 20

yes

Question 21

what is composite demand

Answer 21

where goods have more than one purpose e.g. milk

Question 22

what happens to demand if there is a more equal distribution of luxury goods and why?

Answer 22

demand decreases so it shifts left as there are fewer really rich people who can afford the luxury items

Question 23

what happens to demand if there is a more equal distribution of everyday goods and why?

Answer 23

demand increases so it shifts left as there are more people who can afford the everyday items