Demand

Question 1

price of complement decreases

Answer 1

increase in demand

Question 2

price of substitute increases

Answer 2

increase in demand

Question 3

income increases (normal good)

Answer 3

increase in demand

Question 4

income decreases (inferior good)

Answer 4

increase in demand

Question 5

personal wealth decreases

Answer 5

decrease in demand

Question 6

population increases

Answer 6

increase in demand

Question 7

expectation that price will fall in future

Answer 7

decrease in demand

Question 8

successful advertising campaign

Answer 8

increase in demand

Question 9

what is the theory of demand?

Answer 9

at a higher price a lower quantity will be demanded, ceteris paribus and vice versa

Question 10

effective demand

Answer 10

willing AND able

Question 11

why is a demand curve downwards sloping?

Answer 11

income and substitution effects

Question 12

substitution effect

Answer 12

as price rises (or income decreases) consumers replace more expensive goods with cheaper alternatives - decrease in quantity demanded

Question 13

income effect

Answer 13

as income increases, quanity demanded of good increases as consumers are wealthier, good is relatively cheaper

Question 14

demand equation

Answer 14

Qd = mP + A

Question 15

equation for gradient in demand graph

Answer 15

change in Qd / change in P

change in x / change in y

Question 16

what is A on demand equation?

Answer 16

x-intercept

Question 17

movement along demand curve

Answer 17

when go from one combination on the demand curve to another

change that depends on price

Question 18

shift in demand

Answer 18

when anything other than price changes

Question 19

exceptions to theory of demand

Answer 19

vertical demand curve
Veblen goods
Giffin goods

Question 20

vertical demand curve

Answer 20

will buy same quantity at any price, e.g. life-saving medication

Question 21

Veblen good

Answer 21

upwards sloping demand curve

very wealthy pay more to show status

Question 22

Giffin good

Answer 22

extreme subset of inferior goods
e.g. under extreme poverty, when price of bread rises forced to lose other food sources because bread relatively cheapest and invest everything in bread purchasing