economics 4

Question 1

demand

Answer 1

willingness and ability to purchase a good or service at a given price in a period of time

Question 2

law of demand

Answer 2

normally the quantity demanded varies inversely with the price

Question 3

what is meant by demand

Answer 3

demand always depend on the demand for another product. an example would be demand for popcorn at the cinema depends on demand for cinema tickets
effective demand means the consumer both wants to buy the product and has the money to do so

Question 4

individual demand

Answer 4

the demand for a good or service by an individual consumer

Question 5

market demand

Answer 5

the total demand for a good or service found by adding together individual demands

Question 6

demand curve

Answer 6

a graph showing how the demand for a product varies with the changes in its price

Question 7

shift of a demand curve

Answer 7

a complete movement of the existing demand curve either outward, to the right or inward , to the left

Question 8

movement along the demand curve

Answer 8

when the price changes leading to a movement up or down the existing demand curve

Question 9

causes of shifts in demand

Answer 9

increase in income-consumers can buy more products at every price
increase in marketing-persuades consumers to demand more products at every price
change in taste and fashion-prefer phones to pc
preference for a substitute-if honey is a more popular than jam demand for honey will increase
complimentary goods-if the price of one good falls then demand for any good that goes with it will increase
expectation of a rise in price-consumers buy more products to save more money in the future
population change
government policies-a subsidy or a cut in tax will increase consumers demand

Question 10

subsidy

Answer 10

an amount of money a government gives directly to firms to encourage production and consumption

Question 11

tax

Answer 11

a complimentary payment to the government

Question 12

tax

Answer 12

a complimentary payment to the government

Question 13

pes of demand

Answer 13

the responsiveness of quantity demanded to a change in the price of a product

Question 14

elastic demand

Answer 14

when the percentage change in quantity demanded is greater than the percentage change in price

Question 15

inelastic demand

Answer 15

when the percentage change in quantity demanded is less then the percentage change in price

Question 16

value of ped 0

Answer 16

perfectly inelastic demand

Question 17

value of ped between 0 and -1

Answer 17

inelastic demand

Question 18

value of ped -1

Answer 18

unitary demand

Question 19

value of ped between 0 and infinity

Answer 19

elastic demand

Question 20

value of ped is infinity

Answer 20

perfectly elastic demand

Question 21

importance of price elasticity of demand for consumers

Answer 21

if the product is inelastic they are likely to face price rises as suppliers can easily pass on cost increase
if the product they buy has inelastic demand then the government can impose high taxes raising prices
allows them to make choices if the substitutes are available

Question 22

importance of price elasticity of demand for producers

Answer 22

allows producers to maximise their total revenue
can change different prices to different groups of people for the same product
can affect their decision whether to supply the product or not to.