Week 5

Question 1

Demand

Answer 1

True buying intentions of consumers (Not wants)

Question 2

Law of demand

Answer 2

As a product becomes more expensive, ppl are willing to buy less of it, caused by Income & substitution effect

Question 3

Income effect

Answer 3

When price increase, demand to purchase decrease due to consumer’s purchasing power decreasing.

Question 4

Substitution effect

Answer 4

When price of 1 good increases, other similar products become relatively cheaper.

Question 5

Demand schedule

Answer 5

Table showing the quantity demanded by consumers for a good

Question 6

Non-price factor causing a shift in demand

Answer 6

Level of disposable income, price of substitutes, tastes & preferences, consumer expectations & demographic factor

Question 7

Increase in price

Answer 7

Causes contraction of quantity demanded (line moves down the curve)

Question 8

Decrease in price

Answer 8

Causes expansion of quantity demanded (line moves up the curve)

Question 9

Non-price factor

Answer 9

Causes increase/decrease in demand (demand curve shifts)

Question 10

Price mechanism

Answer 10

Used to allocate & reallocate resources