Topic 3.1 The Determinants of the Demand for Goods and Services

Question 1

Demand

Answer 1

Demand is the quantity of a good or service that consumers are able and willing to buy at a given price during a given period of time

Question 2

Law of demand (for normal goods)

Answer 2

The law of demand states that as a good’s price falls, more of it’s quantity is demanded

Question 3

Veblen goods

Answer 3

This is an anomoly for the law of demand. This is when the price of a certain products increase, demand also increased. This is for extreme luxuries

Question 4

Price and Quantity Demanded Graph

Answer 4

Price is on the y-axis, Quantity Demanded is on the x-axis and Demand is the curve on the graph.

Question 5

A change in price on a PQ graph

Answer 5

A change in price will always and only result in a movement along the demand curve.

Question 6

Shifts upon the Demand Curve

Answer 6

Factors that can cause a shift upon the Demand Curve…
P - Population (or an increase in a particular demographic)
I - Income
R - Related Goods (substitutes or complements)
A - Advertising
T - Tastes/Fashion
E - Expectations
S - Seasons.

Question 7

Giffen Good

Answer 7

Anomaly to Law of Demand

A good that has a greater demand as its price increases. E.g The price of rice increases may mean people have less money to buy more expensive food resulting in more rice being bought.