Demand

Question 1

The concept of utility

Answer 1

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

Question 2

Total utility

Answer 2

The total satisfaction from a given level of consumption

Question 3

Marginal utility

Answer 3

The change in satisfaction from consuming an extra unit

Question 4

Demand

Answer 4

The quantity of a product consumers are willing and able to buy at a set price in specified periods

Question 5

Effective demand

Answer 5

When a consumers desire to buy a product us backed up by an ability to pay for it. They must have sufficient real purchasing power

Question 6

Latent demand

Answer 6

Exists when there is willingness to purchase a good, but there the consumers lack the real purchasing power to be able to afford the product. It can be affected by persuasive advertising - where the producer is seeking to influence consumer tastes and preferences

Question 7

For most goods and services, more is demanded as price falls for a number of reasons

Answer 7

• Firstly at lower prices consumers can afford to purchase more with their income
  > Income effect
• Secondly a fall in price makes one good relativity cheaper than a substitute
  > Substitute effect
• Thirdly a fall in price means that the consumer derives more benefits/ utility/ satisfaction per pound spent on the product than they did before

Question 8

Shifting the demand curve

Answer 8

• When the demand curve shifts, it is because a factor other than price has changes
• A shift in demand curve that shows demand has increased/ decreased at each and every price point

Question 9

Factors that cause demand to shift

Answer 9

• S - Seasonality
• P - Population
• L - Legislation
• A - Advertisement
• D - Derived demand
• S - Substitutes (price of)
• I - Income
• F - Fashion, tastes, preferences
• I - Interest
• C - Complements (price)