Principles of Demand

Question 1

Normal Good

Answer 1

When demand for a good increases in response to higher income

Question 2

Inferior Good

Answer 2

One for which demand falls when income rises

Question 3

Substitutes & Complements

Answer 3

Substitutes and complements refer to goods whose demand curve shifts when the price of a second good changes.

Substitutes: Positively Associated (Lower price of another decreases main good)

Complements: Negatively Associated (Lower price of another, increases main good)

Question 4

Law of Demand

Answer 4

A decrease in the price for a good, with all other variables held constant, causes an increase in the quantity demanded

Question 5

Difference between change in DEMAND and change in QUANTITY DEMANDED

Answer 5

Change in DEMAND - Entire shift in the Demand curve; people will buy more or less at every price

Change in QUANTITY DEMANDED - people buy more or less at one price (demonstrated by a move along the Demand Curve)