Demand And Supply

Question 0

What is composite demand?

Answer 0

Applies to products that are used for more than one purpose.

Increase in demand for one will reduce availability of the good for the alternative use.
E.g a cow- beef and leather

Question 1

What is the definition of demand?

Answer 1

The amount that consumers are willing and able to pay at each given price level.

Question 2

What is effective demand?

Answer 2

Supported by the ability to pay for a good or service.

Question 3

What is derived demand?

Answer 3

When demand for one good or service comes from the demand of another good or service.

Question 4

What is market demand?

Answer 4

Total demand in a market for a good, the sum of all individuals demand at each given price.

Question 5

What happens to the demand curve when price is effected?

Answer 5

EXTENSION= price decreases so demand increase (right/down)

CONTRACTION= price increases so demand decreases (left/up)

Question 6

What is the difference between a normal and inferior good?

Answer 6

Normal= goods/services that will see a rise in demand when income increases
E.g cars EXTENSION

Inferior= goods/services that will see a fall in demand when income increases
E.g public transport CONTRACTION

Question 7

What factors may cause a shift along the demand curve? (7)

Answer 7

• price of substitute goods
• price of complementary goods
• fashion
• the law
• uncertainty over future prices
• weather conditions
• changes in quality

Question 8

What is the definition of supply?

Answer 8

Amount offered for sake at each given price level.

Question 9

What is the difference between planned supply and actual supply?

Answer 9

Planned= the amount producers plan to produce at each given price

Actual= amount that producers in fact produce

Question 10

What is market supply?

Answer 10

The sum of all individual firms supply curves.

Question 11

What factors could cause a right (more) shift along the supply curve?

Answer 11

• increase number of sellers in market
• improvement in technology
• increase in labour productivity
• decrease in raw material prices
• subsidies given by gov

Question 12

What factors could cause a left (less) shift along the supply curve?

Answer 12

• increase in raw material prices
• expectations of a future increase in prices (hold back supply)
• increase in wages causes an increase in factors of production and thus less supply
• regulations and bureaucracy increases costs
• indirect tax paid by the producer