Micro 6 - Demand

Question 1

Why is the demand curve downwards sloping?

Answer 1

the lower the price, the higher the demand

Question 2

Why is more demanded at a lower price? (2 reasons)

Answer 2

1. When price drops, people choose to buy
2. People who already buy a good, choose to buy more of a good

Question 3

what is utility?

Answer 3

Satisfaction from a product or service

Question 4

What is marginal utility?

Answer 4

Marginal utility is the added satisfaction a consumer gets from having one more unit of a good or service.

Question 5

What is diminishing marginal utility?

Answer 5

As a person consumes more of a product or service, the utility they get from it fades

Question 6

How does the downwards sloping demand curve show diminishing market utility?

Answer 6

We buy more of a good as the price decreases as the cheaper price gives us more utility

Question 7

Effective demand definition

Answer 7

Consumers must be willing and able to purchase the good or service

Question 8

What does a movement along a demand curve show?

Answer 8

A movement on the demand curve shows how quantity demanded responds to a change in price

Question 9

What does an extension along the demand curve show?

Answer 9

An extension along the demand curve shows the increase in quantity demanded due to a decrease in price

Question 10

What does a contraction along a demand curve show?

Answer 10

A contraction along a demand curve shows the contraction of quantity demanded as result of an increase in price

Question 11

Why do shifts happen?

Answer 11

Non price factors

Question 12

What happens when a shift happens?

Answer 12

More or less is demanded at any given price

Question 13

Which 4 factors cause the demand curve to shift?

Answer 13

Income
Price of substitutes
Price of complements
Consumer preferences

Question 14

How does income cause demand curve to shift?

Answer 14

Income increases,
So demand increases,
Demand curve shifts to the right,
QTY Demanded increases from Q1-Q2

Question 15

How does the price of substitutes cause the demand curve to shift? (cars, holidays)

Answer 15

Increase in price of Good A causes an increase in demand for Good B.

Demand curve for Good B shifts right.

QTY demanded of good B shifts from Q1-Q2

Question 16

How does the price of complements cause the demand curve to shift?

Answer 16

Increase in price of Good A leads to a decrease in demand for Good B.

Demand curve for Good B shifts left.

QTY demanded of good B decreases from Q1 - Q2

Question 17

How does consumer preferences cause the shift in demand curve?

Answer 17

Popularity of a good increases. increasing the demand for the good.

Good’s curve shifts to the right

QTY demanded shifts from Q1 to Q2

Question 18

What is a normal good?

Answer 18

A good which demand increases as income increases

Question 19

What is an inferior good?

Answer 19

Goods which are consumed because better options can’t be bought with current income

Question 20

How would you expect demand for holidays for Ibiza if the 1. PRICE for Florida holidays substantially fell

2. There is an increase in the price of holidays to Majorca

Answer 20

1. Demand curve shifts left for Ibiza holidays
2. Demand curve shifts to right for Ibiza

Question 21

What does the demand curve look like for a normal good?

Answer 21

Question 22

What does the demand curve look like for an inferior good?

Answer 22