Demand

Question 1

Describe Competitive Market
-what model is used?

Answer 1

has many buyers and sellers of the same good or service, none of whom can influence the price

supply and demand model

Question 2

5 key elements of the supply and demand model

Answer 2

1) the demand curve
2) the supply curve
3) factors that shift the demand curve and factors that shift the supply curve
4) the market equilibrium
5) changes in the market equilibrium

Question 3

What does demand represent

Answer 3

the behaviour of buyers

Question 4

What is a demand schedule?

Answer 4

a table showing how much of a good or service consumers will want to buy at different prices

Question 5

What is a demand curve?

Answer 5

it shows the quantity demanded at various prices
the quantity demand is the quantity that buyers are willing (and able) to purchase at a particular price

Question 6

What is the Law of Demand

Answer 6

a higher price for a good leads people to demand a smaller quantity of that good, other things equal

Question 7

What does an increase/decrease do to a demand curve?

Answer 7

increase= rightward shift
decrease= leftward shift

Question 8

What happens when the price of the good changes?

Answer 8

there’s movement along a demand curve
when the demand shifts people are buying more/less at every price

Question 9

What are the 5 factors that shift the demand curve?

Answer 9

1) changes in the prices of related goods/services
2) changes in income
3) changes in tastes/fads/fashion
4) changes in expectations
5) changes in the number of consumers

Question 10

Describe substitutes

Answer 10

usually serve a similar function ( coffee or tea)

two goods are substitutes if a decrease in the the price of one leads to a decrease in demand for the other (vice versa)

Question 11

Describe Complements

Answer 11

complements are usually consumed together ( milk and cereal)

two goods are complements if a decrease in the price of one good leads to an increase in the demand for the other (vice versa)

Question 12

Describe Changes in Income

Answer 12

it depends on the nature of the good in question

Question 13

What’s a normal good?
What’s an inferior good?

Answer 13

normal: demand increases when income increases

inferior: demand decreases when income increases

Question 14

Describe changes in expectations

Answer 14

if consumers have a choice about the timing of a purchase, they buy according to expectations

buyers adjust current spending in anticipation of the direction of future prices in order to obtain the lowest price possible

Question 15

Describe changes in the number of consumers

Answer 15

as the population of an economy changes, the number of buyers of a particular good also changed- hence changing its demand

Question 16

What’s the market demand curve?

Answer 16

the horizontal sim of the individual demand curves of all consumers