Demand

Question 1

Demand

Answer 1

Demand: Consumers willing & able to buy g&s

• Inverse relationship between Price & Quantity of Demand
• As price rises, demand falls
• As price falls, demand rises

Movement caused by price, shift caused by non price factor

Question 2

Factors That Shift Demand

Answer 2

• Income: Increased income, increase demand as consumer has more money to spend
• Price of Substitutes: Increase in price of substitutes leads to rise in demand, compettiors more expensive so consumers switch
• Price of Compliments: Increase in price of complements decreases demand for good. Products go together so price of 1 affects the other
• Consumer Preferences: Increase in popularity leads to increase in demand, more people want the good

Question 3

Application

(Demand)

Answer 3

Decrease in Demand:
- Technological advantages in food industry, restaurant dining falling due to apps (e.g UberEats)
- Decline in print journalism, online newspapers more convinient
- Coronavirus, fall in aviation industry, ticket demand decreases

Increase in Demand:
- Covid-19, ecommerce business, Amazon profits rise by 200% in 2020
- Due to closing of gyms, Peleton revenue rose by 172% to $607 mil