Demand (Microeconomics)

Question 1

Define demand

Answer 1

The quantity of a good/service consumers are willing and able to buy at a given price in a given time period.

Question 2

What is the law of demand?

Answer 2

There is an inverse relationship between price and quantity demanded. As price increases, the quantity of demand decreases and vice versa assuming ceteris paribus.

Question 3

When drawing a demand curve, what do you label the x and y axis,

Answer 3

X-axis: quantity
Y-axis: price

Question 4

What is effective demand?

Answer 4

When the demand for a product is backed up by a willingness and ability to pay.

Question 5

On a demand curve graph, what does a higher price lead to?

Answer 5

A contraction of quantity demanded.

Question 6

On a demand curve graph, what does a lower price lead to?

Answer 6

An expansion of quantity demanded.

Question 7

What are the two effects of a price change?

Answer 7

Income effect and substitution effect

Question 8

Name four causes of shifts in the demand curve

Answer 8

The effects of advertising and marketing.
Interest rates
Changes in the size and age structure of a population
Seasonal factors

Question 9

What is derived demand?

Answer 9

The demand for a factor of production used to produce another good or service.

Question 10

What is composite demand?

Answer 10

When an increase in the demand for one product leads to a fall in supply of the other