Demand

Question 1

What is demand?

Answer 1

The amount of a good that would be bought at given prices over a period of time

Question 2

What does a demand curve look like?

Answer 2

A slope going down from left to right (like an L)

With price on the vertical and quantity on the horizontal

Question 3

What is the relationship between price and quantity?

Answer 3

Inversley proportional

Question 4

What causes a shift in the right in the demand curve?

Answer 4

An increase in demand

Question 5

What causes a shift in the left in the demand curve?

Answer 5

A decrease in demand

Question 6

What could cause a shift in the demand curve?

Answer 6

-Income
-Fashion and tastes
-Price of substitutes
-Price of complements
-Demographic changes
-Advertising

Question 7

What are inferior goods?

Answer 7

Goods for which demand will fall as income rises or falls

Question 8

Why does advertising cause a shift in the demand curve

Answer 8

Advertising leads to an increased exposure of the good, leading to increased quantity demanded.

Question 9

Why does income cause a shift in the demand curve?

Answer 9

When disposable income increases demand goes up, and vice versa for normal goods

Inferior goods demand will fall, as people can buy better quality substitutes

Question 10

Why does fashion and tastes cause a shift in the demand curve?

Answer 10

-If fashion and tastes change from one to another, demand for the more popular good will rise
-And everything else will experience decreased levels of demand

Question 11

Why does price of substitutes cause a shift in the demand curve?

Answer 11

-If their competing substitue is cheaper, more people will buy that substitute, leading to decreased demand

-If their competing substitute is more expensive, more people will buy from you, leading to increased demand

Question 12

Why does price of complements cause a shift in the demand curve?

Answer 12

-If the complementary good is in high demand, then the good that complements it will increase higher demand as well.

-If the complementary good increases in price and increases decreased demand, you will also face decreased demand.

Question 13

What are substitute goods?

Answer 13

Goods bought as an alternative to another but perform the same function

Question 14

What is a complementary good?

Answer 14

Goods purchased together because they are consumed together