Kognity Ch. 1.2.2 - Demand

Question 1

What is demand?

Answer 1

Demand is the quantity of a good or service that consumers are willing and able to purchase at a given price during a specific time period, ceteris paribus (i.e when they have only to consider the price of the good). It is also known as “effective demand”, which is illustrated on a demand curve.

Question 2

What does “ceteris paribus” mean?

Answer 2

A Latin expression meaning “all else equal”. We assume that all other variables remain constant.

Question 3

What is the law of demand?

Answer 3

The law of demand states that “as the price of a product decreases, the quantity demanded of it will usually increase (and vice versa), ceteris paribus”.
Or even more simply, “the demand curve normally slopes downwards”.

Question 4

Which two price-related factors can lead to an increase in the quantity demanded of a good/service?

Answer 4

Income effect

Substitution effect

Question 5

What is market demand?

Answer 5

The sum of all the individual demands for a product at every price.