Introduction to economics: Demand

Question 1

What is demand?

Answer 1

In economics, demand is the quantity of a good that consumers are willing and able to purchase at various prices during a given time. The relationship between price and quantity demand is also called the demand curve.

Question 2

What is demand in economics?

Answer 2

What Is Demand? Demand is an economic concept that relates to a consumer’s desire to purchase goods and services and willingness to pay a specific price for them. An increase in the price of a good or service tends to decrease the quantity demanded.

Question 3

What Is a Demand Schedule?

Answer 3

In economics, a demand schedule is a table that shows the quantity demanded of a good or service at different price levels. A demand schedule can be graphed as a continuous demand curve on a chart where the Y-axis represents price and the X-axis represents quantity.

Question 4

What is an example of price related goods?

Answer 4

Suppose the price of doughnuts were to fall. Many people who drink coffee enjoy dunking doughnuts in their coffee; the lower price of doughnuts might therefore increase the demand for coffee, shifting the demand curve for coffee to the right.

Question 5

Price of related goods definition

Answer 5

The price of related goods is one of the other factors affecting demand. a. Related goods are classified as either substitutes or complements. 1. Substitutes are goods that satisfy a similar need or desire.

Question 6

What does complement price mean?

Answer 6

Complements. Consumed in place of each other. Consumed with each other. A price reduction in one good increases the demand for the other good. A price increase in one good decreases demand for the other good.

Question 7

What is the difference between complement goods vs substitute goods?

Answer 7

A substitute good is a good that serves the same purpose as another good for consumers. A complementary good is a good that adds value to another good when they are consumed together.

Question 8

How does expectations of prices changing influence consumption?

Answer 8

Expectations: - If consumers expect prices to increase in the future they increase their demand today. D curve shifts right. - If consumers expect their income to rise in the future, they increase their spending today, demand increases, D shifts right.

Question 9

What is an example of a change in future expectations?

Answer 9

For example, if people hear that a hurricane is coming, they may rush to the store to buy flashlight batteries and bottled water. If people learn that the price of a good like coffee is likely to rise in the future, they may head for the store to stock up on coffee now.

Question 10

Will changes in income tastes or preferences or expectations cause a movement along the demand curve?

Answer 10

Changes in factors like average income and preferences can cause an entire demand curve to shift right or left. This causes a higher or lower quantity to be demanded at a given price. Ceteris paribus assumption. Demand curves relate the prices and quantities demanded assuming no other factors change.

Question 11

Difference between normal good and inferior good?

Answer 11

A normal good is one whose demand increases when people’s incomes start to increase, giving it a positive income elasticity of demand. Inferior goods are associated with a negative income elasticity, while normal goods are related to a positive income elasticity.

Question 12

What Does It Mean When There’s a Shift in Demand Curve?

Answer 12

The demand curve shifts to the left if the determinant causes demand to drop. That means less of the good or service is demanded. That happens during a recession when buyers’ incomes drop.

Question 13

Why does a demand curve fall from left to right?

Answer 13

Thus, when the quantity of goods is more, the marginal utility of the commodity is less. Thus, the consumer is not willing to pay more price for the commodity and its demand will decline. Also, when the price of the commodity is low, its demand increases. Hence, the demand curve slopes downwards from left to right.

Question 14

What is the income effect?

Answer 14

The income effect describes how an increase in income can change the quantity of goods that consumers will demand. For so-called normal goods, as income rises so does the demand for them (and vice-versa). This is reflected in microeconomics via an upward shift in the downward-sloping demand curve.

Question 15

What Are Normal Goods?

Answer 15

A normal good is a good that experiences an increase in demand due to an increase in a consumer’s income.

Normal goods have a positive correlation between income and demand.

Examples of normal goods include food, clothing, and household appliances.

Question 16

What Is an Inferior Good?

Answer 16

An inferior good is one whose demand drops when people’s incomes rise.
When incomes are low or the economy contracts, inferior goods become a more affordable substitute for a more expensive good.
Inferior goods may refer to the brand of products purchased, items purchased, or instance of how something occurs (i.e. taking a bus vs. driving a new car).
Inferior goods are the opposite of normal goods, whose demand increases even when incomes increase.
Inferior goods also oppose luxury goods, items of higher quality often sold at a premium that are not needed.

Question 17

What is determinants of demand?

Answer 17

changes in conditions that cause the demand curve to shift; the mnemonic TONIE can help you remember the changes that can shift demand (T-tastes, O-other goods, N-number of buyers, I-income, E-expectations)

Question 18

What is quantity demanded?

Answer 18

the specific amount that buyers are willing to purchase at a given price; each point on a demand curve is associated with a specific quantity demanded.

Question 19

What is meant by income elasticity of demand?

Answer 19

Income elasticity of demand or YED is referred to as the corresponding change in the demand of a product in response to the change in a consumer’s income. It can also be defined as the ratio of change in the quantity demanded by the change in the customer’s income.

Question 20

What is negative income elasticity of demand?

Answer 20

It refers to a condition in which demand for a commodity decreases with a rise in consumer income and increases with a fall in consumer income. Inferior goods are such commodities.

Question 21

What is the law of diminishing marginal utility?

Answer 21

In simple terms, the law of diminishing marginal utility means that the more of an item that you use or consume, the less satisfaction you get from each additional unit consumed or used.

Question 22

What are the five main shifters of demand?

Answer 22

The five main shifters of demand is another term for the five main determinants of demand. These are price, expectations, tastes and preferences, prices of related goods and services, and income. They are also called shifters due to their ability to move the demand curve rightward or leftward on a graph.