LS8- Demand

Question 1

Demand

Answer 1

The quantity of a good or service consumers are willing to purchase at a given price over a given period of time.

Question 2

Law of demand

Answer 2

As the price of a good increases, quantity demanded decreases, vice versa

Question 3

How does a change in price reflect on a demand diagram?

Answer 3

Price increase- contraction in demand
Price decrease- extension in demand

Question 4

Substitute goods

Answer 4

Two alternative products that can be used for the same purpose

Question 5

Complement goods

Answer 5

Products that are used together

Question 6

Non price factors that shift the demand curve (PASIFIC)

Answer 6

Population- increase in pop due to e.g. rise in net immigration will increase the willingness and ability of consumer to buy goods/services, right shift in demand

Advertising- positive advertising-> more ppl willing to consume at same price

Price of substitute goods- price of substitute increases-> competitiveness of good increases-> willingness and ability to consume good increases-> right shift

Income- higher incomes increase demand for a normal good or a luxury good, decrease for inferior good

Fashion/ Tastes- fashion/tastes for a certain good increases willingness to consume it, right shift

Interest rates- lower interest-> cheaper to borrow money, goods like houses and cars are often financed using credit, causing right shift for those goods

Price of complement goods- if price of complementary good decreases, willingness to buy first good increases