Demand Curve

Question 1

What impact does Changes in price of Good A does to the graph ?

Answer 1

Changes in quality demanded

Movement along the demand curve

Question 2

What the the 6 non-price factors ?

Answer 2

1. Changes in income
2. Changes in price of related goods
   - change in price of substitute
   - change in price of complements
3. Changes in taste and preferences
4. Consumer expectations of future price and future income change
5. Government legislation
   - reduce in direct tax
   - provision of direct subsidies
   - change in legislation
6. Other factors
   - changes in interest rate
   - changes in demographic of the population

Question 3

How does the change in non-price factors affect the demand curve ?

Answer 3

Changes the demand of good A

Causes a SHIFT in demand curve

Question 4

How does the change in price of substitute affect the demand graph ?
Let Good A be the substitute to Good B

Answer 4

1. When there is a fall in the price of Good A
   - rise in quantity demanded for Good A
2. Fall in demand for Good B
   - leftward shift on the demand curve for Good B

!! The extent of the shift depends on how good the substitute is. If the substitute is good the demand curve will have a bigger shift
- Good B very responsive to the change of Good A

Question 5

Price factor will cause a what to the demand curve ?

Answer 5

A movement
Quantity demanded increases
Eg when the Good A gets more expensive

Question 6

[ changes in income ]

What is normal goods ?

Answer 6

When income increases , 
The increase of purchasing power. 
Hence increase in demand for normal goods 
CETERIS PARIBUS 
Rightward shift 
Example: iPhone 
Simple words: Luxury goods

Question 7

[ changes in income ]

What is inferior goods ?

Answer 7

Inferior goods are goods that is required by one to survive. For example instant noodles instead of normal noodles that cost more.

When the income increase
the purchasing power of households increases, this causes a decrease in demand of inferior goods.

The demand for inferior goods decrease as one switch to better quality food.

Leftward shift in demand curve.