THE DETERMINANTS OF THE DEMAND FOR GOODS AND SERVICES

Question 1

Define demand.

Answer 1

Demand is the quantity of a good/service that consumers are willing and able to buy at a given price at a particular time.

Question 2

Why does a demand curve usually slope downward?

Answer 2

Because the higher the price, the lower the quantity demanded.

Question 3

What’s is the income effect?

Answer 3

Assuming a fixed level of income the income effects means that as a price of a good increases the less a consumer can buy therefore demand decreases.

Question 4

What is the substitution effect?

Answer 4

A fall in the price of a good makes it relatively cheaper than other goods so consumer demand will increase for the cheaper good and decrease for the more expensive good.

Question 5

What is the consequence of a demand curve shifting to the left?

Answer 5

It indicates an decrease in demand at every price.

Question 6

What are two determinate s of demand?

Answer 6

Changes in tastes and fashion. Changes to people’s real income.

Question 7

What is a substitute good?

Answer 7

Good which are alternatives to each other and are in competitive demand.

Question 8

What are complementary goods?

Answer 8

Goods that are used together and are in joint demand.

Question 9

What is derived demand?

Answer 9

Demand for a good used in the production of another good.