Micro - Demand

Question 1

What is a market

Answer 1

A Market is any arrangement by which buyers and sellers come together to exchange goods and services which are scarce and can be therefore be priced

Question 2

What is a free market

Answer 2

It is one that is free from government interference or intervention

Question 3

What do free markets operate on

Answer 3

The basis of demand and supply

Question 4

What causes quantity to change when prices move

Answer 4

Income effect, Less able

Substitution effect, Less willing

Question 5

What is demand

Answer 5

It is the quantity of a good or service that consumers are wiling and able to buy at any particular price`

Question 6

What is a contraction

Answer 6

It is the increase in price which causes the decrease in quantity

Question 7

What is a extension

Answer 7

It is the lowering of a price which then increases the quantity

Question 8

What factors affect demand

Answer 8

Income of consumers
Price of substitutions
Price of complements
tastes and preferences
Population size and structure
cost and availability of credit

Question 9

What does ceteris paribus mean

Answer 9

That all the other factors that affect demand are unchanged

Question 10

What is a movement on a demand curve

Answer 10

It is the point moving up and down the curve

Question 11

What causes movement

Answer 11

Change in price of the good/service itself

Question 12

What is the effect of a movement

Answer 12

A change in quantity demanded

Question 13

What is a shift

Answer 13

The movement of the whole demand curve

Question 14

What causes a shift

Answer 14

A change in any other factors

Question 15

What is the effect of a shift

Answer 15

A change in demand at all prices

Question 16

What are substitutes

Answer 16

Goods that are in competition
Two goods/services in competitive demand

Question 17

What are complements

Answer 17

Goods that are bought together
Two goods and services in joint demand

Question 18

What is Revenue

Answer 18

It is the income by a firm from the sale of its output

Question 19

Formula for Total Revenue

Answer 19

= price per unit x numbers of unit sold

Question 20

How to know whether you should change prices

Answer 20

As long as extra revenue earned from loyal customers who continue to purchase the good is greater than the revenue lost from those customers who no longer purchase then TR rises

Question 21

What is Profit

Answer 21

The extra money earned after subtracting revenue from costs

Question 22

What are the types of demand

Answer 22

Individual
Market
Joint
Competitive
Derived
Composite
Exceptional

Question 23

What is individual demand

Answer 23

The quantity of a good or service that an individual consumer is willing and able to buy at different prices

Question 24

What is Market demand

Answer 24

The total quantity of a good or service bought by all consumers in a particular market at different prices

Question 25

What is joint demand

Answer 25

When two goods are bought together as complements

Question 26

What is competitive demand

Answer 26

When two goods are rivals or substitutes for consumer spending

Question 27

What is derived demand

Answer 27

When the demand for a factor of production is the direct result of the demand for the output it produces

Question 28

What is composite demand

Answer 28

When the demand for a factor of production is composed of multiple different areas of individual demand

Question 29

what is exceptional demand

Answer 29

When/if the demand for a good defies the law of demand so that price and demand are positively related