Demand (Y12)

Question 1

demand definition?

Answer 1

you’re both willing and able to buy it.

Question 2

extension in demand meaning on graph?

Answer 2

price = down
quantity demanded = up

Question 3

contraction in demand meaning on graph?

Answer 3

price = up
quantity demanded = down

Question 4

price elasticity of demand (PED) definition?

Answer 4

measures how much quantity demanded will respond to change in price.

Question 5

PED Calculation:

Answer 5

% change in quantity demanded / % change in price.

Question 6

factors which influence PED:

Answer 6

• necessity
• addiction & habit
• availability of substitutes
• brand loyalty
• proportion of income
• time period

Question 7

necessity meaning?

Answer 7

something we need

Question 8

luxury meaning?

Answer 8

something we dont need

Question 9

how does a necessity affect ped?

Answer 9

e.g petrol - unresponsive - inelastic

Question 10

how does a luxury affect PED?

Answer 10

e.g bottled water (not needed) - responsive - elastic

Question 11

how does addiction & habit affect PED?

Answer 11

addiction % habit = inelastic

Question 12

how does availability of substitutes affect PED

Answer 12

few substitutes e.g apple charger - unresponsive - inelastic
many substitutes e.g crisp - responsive - elastic

Question 13

how does brand loyalty affect ped?

Answer 13

strong brand loyalty - inelastic
weak brand loyalty - elastic

Question 14

how does proportion of income affect ped?

Answer 14

large proportion - elastic e.g computer
small proportion - inelastic e.g biro pen

Question 15

how does time affect ped?

Answer 15

short run - no time to search for substitutes - inelastic
long run - enough time to search for substitutes - elastic

Question 16

Normal good?

Answer 16

Demand increase when incomes rises
Demand decreases when income falls

Question 17

Inferior good

Answer 17

Demand decreases when income rises
Demand increases when income fall
E.g company based food (when income rises people would go to more expensive based food)

Question 18

How does substitutes affect Demand?

Answer 18

If the price of one good decrease e.g Samsung then the demand for the other good decreases.
If the price of one good increase e.g apple then the demand for the other good increases.

Question 19

Complementary goods?

Answer 19

goods which are bought and used together (e.g. printer and printer ink)

Question 20

How does complementary goods affect Demand?

Answer 20

If the price of a product e.g phone apps increased , then the demand for the other good decreases e.g phone
If the price of a product e.g phone apps decreased , then the demand for the other good would increase e.g phone

Question 21

Factors which affect Demand / Conditions of Demand

Answer 21

• advertising
• fashion and trends
• population and age structure
• seasons
• incomes
• price of other goods. (Substitutes and complementary goods)

Question 22

Income Elasticty Of Demand?

Answer 22

Measures how much quantity demanded will respond to a change in income.

Question 23

Income Elasticity of Demand formula

Answer 23

% change in quantity demanded / % change in income

Question 24

Cross Elasticity Of Demand?

Answer 24

Measures how much quantity demanded of good A will respond to a change in price of good B.

Question 25

Cross Elasticity Of Demand Formula:

Answer 25

XED: % change of quantity demanded of good A / % change of price of Good B