Demand

Question Define demand. tap to flip ↻ Answer Demand is the quantity of a good or service that consumers are willing and able to buy at a given price during a given period of time. Question What is the law of demand? tap to flip ↻ Answer The law of demand states that, all else equal, as the price of a good rises, the quantity demanded falls, and as the price falls, the quantity demanded rises. Question What is the difference between demand and quantity demanded? tap to flip ↻ Answer Demand refers to the entire demand curve (the whole relationship between price and quantity demanded). Quantity demanded refers to a specific amount demanded at a particular price. Question What is a demand schedule? tap to flip ↻ Answer A demand schedule is a table that shows the quantity demanded of a good at different prices, holding other factors constant. Question What is a demand curve? tap to flip ↻ Answer A demand curve is a graph that shows the relationship between the price of a good and the quantity demanded, typically downward sloping. Question Why does the demand curve slope downward? tap to flip ↻ Answer It slopes downward due to the income effect (as price falls, real income rises, so more is bought) and the substitution effect (as price falls, the good becomes cheaper relative to… Question What is a change in quantity demanded? tap to flip ↻ Answer A change in quantity demanded is a movement along the demand curve caused only by a change in the price of the good itself. Question What is a change in demand? tap to flip ↻ Answer A change in demand is a shift of the entire demand curve caused by a change in a factor other than the price of the good (e.g., income, tastes, prices of related goods). Question What are normal goods? tap to flip ↻ Answer Normal goods are goods for which demand increases when consumer income rises, and decreases when income falls. Question What are inferior goods? tap to flip ↻ Answer Inferior goods are goods for which demand decreases when consumer income rises, and increases when income falls. Question What are substitutes? tap to flip ↻ Answer Substitutes are goods that can be used in place of each other. An increase in the price of one good leads to an increase in demand for the other. Question What are complements? tap to flip ↻ Answer Complements are goods that are used together. An increase in the price of one good leads to a decrease in demand for the other. Question How does a change in consumer income affect demand for a normal good? tap to flip ↻ Answer For a normal good, an increase in income shifts the demand curve to the right (demand increases); a decrease in income shifts it to the left (demand decreases). Question How does a change in consumer income affect demand for an inferior good? tap to flip ↻ Answer For an inferior good, an increase in income shifts the demand curve to the left (demand decreases); a decrease in income shifts it to the right (demand increases). Question How does a change in the price of a substitute affect demand? tap to flip ↻ Answer If the price of a substitute rises, demand for the original good increases (shifts right). If the price of a substitute falls, demand for the original good decreases (shifts left). Question How does a change in the price of a complement affect demand? tap to flip ↻ Answer If the price of a complement rises, demand for the original good decreases (shifts left). If the price of a complement falls, demand for the original good increases (shifts right). Question How do changes in tastes and preferences affect demand? tap to flip ↻ Answer A favorable change in tastes increases demand (shifts right); an unfavorable change decreases demand (shifts left). Question How does population affect demand? tap to flip ↻ Answer An increase in population typically increases demand for most goods (shifts right); a decrease in population typically decreases demand (shifts left). Question What is the effect of expectations of future prices on current demand? tap to flip ↻ Answer If consumers expect prices to rise in the future, current demand increases (shifts right). If they expect prices to fall, current demand decreases (shifts left). Question What is the difference between a movement along the demand curve and a shift of the demand curve? tap to flip ↻ Answer A movement along the demand curve is caused by a change in the price of the good itself (change in quantity demanded). A shift of the demand curve is caused by a change in any othe… Question What is market demand? tap to flip ↻ Answer Market demand is the sum of all individual quantities demanded by all consumers at each price. Question What is the law of demand's ceteris paribus assumption? tap to flip ↻ Answer The law of demand holds other factors constant (ceteris paribus), meaning only the price of the good changes while income, tastes, prices of related goods, etc., remain unchanged. Question What is a Giffen good? tap to flip ↻ Answer A Giffen good is a special type of inferior good for which an increase in price leads to an increase in quantity demanded, violating the law of demand. Question What is conspicuous consumption? tap to flip ↻ Answer Conspicuous consumption is the purchase of goods to display wealth and status, which can lead to a positive relationship between price and quantity demanded for some luxury goods (… Question What is the difference between individual demand and market demand? tap to flip ↻ Answer Individual demand is the demand of a single consumer; market demand is the total demand of all consumers in the market. Question What happens to the demand curve when demand increases? tap to flip ↻ Answer The demand curve shifts to the right (outward). Question What happens to the demand curve when demand decreases? tap to flip ↻ Answer The demand curve shifts to the left (inward). Question List the determinants of demand (factors that shift the demand curve). tap to flip ↻ Answer 1. Consumer income 2. Prices of related goods (substitutes and complements) 3. Tastes and preferences 4. Population and demographics 5. Expectations of future prices, income, etc.… Question What is the relationship between price and quantity demanded as shown by the law of demand? tap to flip ↻ Answer They are inversely related: when price goes up, quantity demanded goes down; when price goes down, quantity demanded goes up. Question What is the difference between a normal good and an inferior good? tap to flip ↻ Answer For normal goods, demand increases when income rises. For inferior goods, demand decreases when income rises. Question How does a change in the price of a good affect quantity demanded? tap to flip ↻ Answer A change in the price of the good itself causes a movement along the demand curve, changing quantity demanded. Question What is the effect of an increase in the price of a complement on the demand for a good? tap to flip ↻ Answer Demand for the good decreases (shifts left) because the two goods are used together. Question What is the effect of an increase in the price of a substitute on the demand for a good? tap to flip ↻ Answer Demand for the good increases (shifts right) because consumers switch to the relatively cheaper good. Question What is the effect of a decrease in consumer income on the demand for an inferior good? tap to flip ↻ Answer Demand for the inferior good increases (shifts right) because consumers buy more of it as they can afford less of normal goods. Question What is the effect of a decrease in consumer income on the demand for a normal good? tap to flip ↻ Answer Demand for the normal good decreases (shifts left) because consumers can afford less. Question What is the effect of a favorable change in tastes on demand? tap to flip ↻ Answer Demand increases (shifts right). Question What is the effect of an unfavorable change in tastes on demand? tap to flip ↻ Answer Demand decreases (shifts left). Question What is the effect of an increase in population on demand? tap to flip ↻ Answer Demand increases (shifts right) because there are more consumers. Question What is the effect of an expectation of higher future prices on current demand? tap to flip ↻ Answer Current demand increases (shifts right) as consumers buy now to avoid higher prices later. Question What is the effect of an expectation of lower future prices on current demand? tap to flip ↻ Answer Current demand decreases (shifts left) as consumers wait for lower prices. Question What is the difference between a change in demand and a change in quantity demanded? tap to flip ↻ Answer A change in demand is a shift of the entire demand curve due to a non-price determinant. A change in quantity demanded is a movement along the demand curve due to a change in the g… Question What is the law of demand? tap to flip ↻ Answer The law of demand states that, all else equal, as the price of a good rises, the quantity demanded falls, and as the price falls, the quantity demanded rises. Question What is a demand schedule? tap to flip ↻ Answer A demand schedule is a table that shows the quantity demanded of a good at different prices, holding other factors constant. Question What is a demand curve? tap to flip ↻ Answer A demand curve is a graph that shows the relationship between the price of a good and the quantity demanded, typically downward sloping. Question What is market demand? tap to flip ↻ Answer Market demand is the sum of all individual quantities demanded by all consumers at each price. Question What are the determinants of demand? tap to flip ↻ Answer Income, prices of related goods, tastes, population, expectations, and government policies. Question What is a normal good? tap to flip ↻ Answer A normal good is a good for which demand increases when income rises. Question What is an inferior good? tap to flip ↻ Answer An inferior good is a good for which demand decreases when income rises. Question What are substitutes? tap to flip ↻ Answer Substitutes are goods that can be used in place of each other; an increase in the price of one increases demand for the other. Question What are complements? tap to flip ↻ Answer Complements are goods used together; an increase in the price of one decreases demand for the other. Question What is the effect of an increase in income on demand for a normal good? tap to flip ↻ Answer Demand increases (shifts right). Question What is the effect of an increase in income on demand for an inferior good? tap to flip ↻ Answer Demand decreases (shifts left). Question What is the effect of an increase in the price of a substitute on demand? tap to flip ↻ Answer Demand for the original good increases (shifts right). Question What is the effect of an increase in the price of a complement on demand? tap to flip ↻ Answer Demand for the original good decreases (shifts left). Question What is the effect of a change in tastes on demand? tap to flip ↻ Answer Favorable tastes increase demand (shift right); unfavorable tastes decrease demand (shift left). Question What is the effect of population on demand? tap to flip ↻ Answer An increase in population increases demand (shifts right); a decrease decreases demand (shifts left). Question What is the effect of expectations of future prices on current demand? tap to flip ↻ Answer Expectation of higher future prices increases current demand (shifts right); expectation of lower future prices decreases current demand (shifts left). Question What is the difference between a movement along the demand curve and a shift of the demand curve? tap to flip ↻ Answer A movement along the demand curve is caused by a change in the price of the good itself. A shift of the demand curve is caused by a change in a non-price determinant of demand. Question What is a Giffen good? tap to flip ↻ Answer A Giffen good is an inferior good for which an increase in price leads to an increase in quantity demanded, violating the law of demand. Question What is conspicuous consumption? tap to flip ↻ Answer Conspicuous consumption is the purchase of goods to display wealth and status, which can lead to a positive relationship between price and quantity demanded for some luxury goods (…