U1 AOS 2 - Lesson 3 - NPF Influencing Demand (Movement)

Question 1

Which of the following will not cause a shift of the demand curve?

A) Consumer income
B) Price
C) Consumer Sentiment
D) Trends

Answer 1

B) Price

Question 2

What is meant by ‘decrease in demand’?

Answer 2

A decrease in demand refers to a situation where consumers are willing to purchase less of a good or service at every price level.

Question 3

Point of Difference between substitution effect and price of substitute

Answer 3

• Point of Difference = whether it is a non-price factor that causes a shift of the demand curve or not
• Substitution effect explains process of how higher prices lead to lower consumption. Increase in price of a good or service → higher trade off → decreased consumption
• Price of a substitute is a non price factor influencing demand. Substitute goods are alternative goods/services. Decreased price of substitute → consumers will switch their consumption to the substitute → lower demand for original good and higher demand for substitute

Question 4

Point of Difference between income effect and change in disposable income

Answer 4

• Point of difference = whether it is a non-price factor affecting demand or not
• Income effect decribes how increased/decreased prices of goods/services impact consumers’ purchasing power and therefore their consumption
• Change in disposable income is a non-price factor affecting demand. Increased disposable income → increased demand. Decreased disposable income → decreased demand.

Question 5

A movement from point A to point B represents a…

Answer 5

Contraction

Question 6

A movement from point A to point B represents a…

Answer 6

Expansion

Question 7

A contraction along the demand curve is caused by…

Answer 7

an increase in price

Question 8

An expansion along the demand curve is caused by…

Answer 8

a decrease in price

Question 9

Expansions and contractions along the demand curve are examples of [price/non price] factors

Answer 9

Price factors

Question 10

Non Price Factors that can cause a contraction along the demand curve.

Answer 10

Factors that decrease supply

• Increases in the costs of production
• Unfavourable technology
• Decrease in productivity
• Unfavourable climatic conditions

Question 11

Non Price Factors that can cause an expansion along the demand curve.

Answer 11

Factors that increase supply

• Decreases in the costs of production
• Favourable technology
• Increase in productivity
• Favourable climatic conditions

Question 12

If the supply curve shifts, there will be a ____________ the demand curve

Answer 12

movement along