Supply & Demand

Question 1

Name the 4 factors that influence demand

Answer 1

1) Price of good
2) Price of other good
3) Income
4) Other factors

Question 2

How does price influence demand?

Answer 2

Too expensive - cant afford 
low price - shows quality 
snob effect 
necessity 
frequency of consumption

Question 3

How does the price of other goods influence demand?

Answer 3

if other similar/same products on the market which are cheaper, may chose to purchase that product.
snob effect

Question 4

How does income influence demand?

Answer 4

as income increases - consumption increases

Question 5

Name some other factors which may influence demand…

Answer 5

• trend/fashion
• preference
• reputation of certain brands
• media (marketing failure)
• promotions (sales, discounts)
• availiability
• change of law
• season
• competition
• ECONOMY - confidence of economy affects wether you decide to purchase a product or not and take risks

Question 6

Define The Law of Diminishing Marginal Returns

Answer 6

when the utility gained from consuming the next unit falls over time

Question 7

Define contraction of demand

Answer 7

when quantity demanded for a good falls because its price rises; shown by movement UP the demand curve

Question 8

Define extension of demand

Answer 8

when quantity demanded for a good increases because its price falls; shown by movement DOWN the demand curve

Question 9

Define consumer surplus

Answer 9

the difference between how much buyers are prepared to pay for a good and what they actually pay for a good - about the welfare gained from consuming the goods