Demand and Diminishing Marginal Utilitty

Question 1

What is Demand

Answer 1

Willingness and able to buy sth at a given price in a given period of time

Question 2

Read the Demand graph on Pg 2

Answer 2

Read

Question 3

Describe the shape of the demand curve

Answer 3

Downward sloping linear graph

Question 4

Basic Law of Demand

Answer 4

Demand varies inversely with price

Question 5

2 reasons for this inverse relationship? (Demand)

Answer 5

Income Effect: Fall in price allow people to buy more. Substitution Effect: Fall in price of Good A make it cheaper compared to substitutes of Good A, causing some consumers to switch to Good A.

Question 6

What is Diminishing Marginal utility?

Answer 6

Extra happiness after consuming each unit falls.

Question 7

Ceteris Paribus

Answer 7

All else being equal

Question 8

All else being equal

Answer 8

Ceteris Paribus

Question 9

Difference of Movement in Demand vs Shift in Demand

Answer 9

Movement in Demand is caused by change in price, while shift in demand is caused by change in number of factors, causing demand to shift left or right.

Question 10

How income cause demand to shift

Answer 10

Higher income, demand shifts right.

Question 11

How advertising cause demand to shift?

Answer 11

If there is more advertising on A, then demand for A will shift right.

Question 12

How substitute goods cause demand to shift?

Answer 12

If X price increases, demand for substitutes of X will shift right.

Question 13

How complementary goods cause demand to shift?

Answer 13

Lower price of X, demand for complements of X will shift right