Demand And Supply

Question 1

Composite demand

Answer 1

Demand for a good which has more than one use where an increase in demand for one use will reduce the supply of this good for its other use.

Eg if more wheat is demanded as biofuel becomes more popular there will be less wheat to eat.

Question 2

Derived demand

Answer 2

Where one good is necessary for the production of another good.
An increase in demand at one stage of production influences demand at another stage. E.g. Increase is demand for cars result to the demand for steel

Question 3

Complementary demand

Answer 3

The demand of one good is influenced by the demand of an associated good. E.g PS4 console demand increase results to complementary demand for games

Question 4

Substitute goods

Answer 4

Replacement for another product or service in the same competitive sector
E.g. The rice in price of Esso petrol results for consumers to substitute away from Esso towards shell or other competing brands

Question 5

Substitution effect

Answer 5

When price increases people switch to a cheaper alternative

E.g. They ration spending

Question 6

Income effect

Answer 6

When price increases people cannot buy as much therefore purchasing power is reduced

Question 7

Speculative demand

Answer 7

Where demand is greater for a good because of a likely future increase in its resale value

Question 8

Equilibrium

Answer 8

Equilibrium is a condition or state in which economic forces being supply and demand are equal, balanced or at rest

Question 9

Equilibrium price

Answer 9

is where the supply of goods matches demand.

Question 10

Consumer surplus

Answer 10

The difference between the price at which a customer is willing to pay for a good or a service and the price they actually pay for it

Question 11

PED

Answer 11

Price Elasticity Demand

measures the extent to which the demand for a good changes in response to a change in price for that good