Unit 2 Lesson 4: Demand

Question 1

Give a simple description of demand.

Answer 1

The quantity of a good or service that
buyers are willing and able to buy at all
possible prices during a period of time.

Question 2

What is the law of demand?

Answer 2

As the price of a good or service rises
(or falls), the quantity of that good or
service that people are willing and able
to buy during a certain period of time
falls (or rises

Question 3

What is the substitution effect and show the result of supply and demand.

Answer 3

If price goes up
for the Big Mac,
consumers will
simply buy
more of another
good.

P⬆️D⬇️

Question 4

What is the income effect and show result of supply and demand.

Answer 4

A rise in price
for the Big Mac
will cause an
impact to a
person’s
income.

P⬆️D⬇️

Question 5

What does a demand shift to the left mean and what does a demand shift to the right mean?

Answer 5

Left: decreased demand
Right: increased demand

Question 6

What factors cause a demand shift in any direction? (demand determinants)

Answer 6

Change in one of the five factors (Demand
Determinants)
• Preferences and Tastes
• Income
• Population
• Expectations
• Related Goods

Question 7

What is a complementary good and give an example?

Answer 7

Complementary goods are products that
are used together.
• Coffee and Donuts
• If the price of a complementary good
increases, it decreases demand for the
other good.
• Conversely, if the price of a
complementary good decreases, it
increases the demand for the other good