Demand

• What is demand in economics?

  Demand is the quantity of goods or services that will be bought at any given price over a period of time.
• What happens to demand when there are changes in the conditions of demand?

  Demand for a good will fall if there are changes in the conditions of demand, resulting in a shift in the demand curve.
• What does a change in price lead to in terms of the demand curve?

  A change in price leads to a movement along the demand curve.
• What do changes in factors other than price cause in the demand curve?

  A change in any other factor affecting demand shows a shift of the demand curve.
• What is the ceteris paribus condition in relation to demand?

  • It means "all other things being equal."
  • It allows analysis of the effect of price changes on quantity demanded.
• If the average price of a car falls from £8000 to £4000, what happens to the quantity demanded?

  The quantity demanded of cars would rise.
• How does the demand curve illustrate the relationship between price and quantity demanded?

  The demand curve is downward sloping, showing that as price falls, quantity demanded rises.
• What does a movement along the demand curve indicate?

  A movement along the demand curve indicates a change in quantity demanded due to a change in price.
• What is an extension of demand?

  An extension of demand occurs when the quantity demanded rises due to a fall in price.
• What is a contraction of demand?

  A contraction of demand occurs when the quantity demanded falls due to a rise in price.
• What does the demand curve show in terms of effective demand?

  The demand curve shows effective demand, indicating how much consumers can afford to buy at any given price.
• What is the general relationship between price and quantity demanded according to economists?

  In almost all cases, rises in price lead to falls in quantity demanded, indicating an inverse relationship.
• What are conditions of demand?

  Conditions of demand are factors other than price that can cause demand for a product to change.
• What happens to the demand curve when conditions of demand change?

  Changes in the conditions of demand cause a shift in the demand curve either to the right or to the left.
• How does income affect demand for normal goods?

  Demand for a normal good increases when income rises.
• What is the effect of a rise in income on the demand curve for clothing?

  A rise in income shifts the demand curve for clothing to the right, indicating higher quantity demanded at the same price.
• If income increases from OA to OB, what happens to the demand curve?

  The demand curve shifts to the right from D to D'.
• How does the price of other goods influence demand?

  The price of other goods can lead to an increase or decrease in demand for a good.
• What happened to the demand for pasta during the drought of 1976 in the UK?

  The demand for pasta increased as the price of potatoes soared, leading consumers to buy more pasta.
• What is the impact of a rise in the price of tennis rackets on the demand for tennis balls?

  A rise in the price of tennis rackets is likely to reduce the demand for tennis balls.
• What are some other factors that affect demand apart from price and income?

  • Changes in population
  • Changes in fashion
  • Changes in legislation
  • Advertising
• What does the law of diminishing marginal utility state?

  The law of diminishing marginal utility states that the value or utility from the last product consumed falls as more units are consumed.
• How does the law of diminishing marginal utility explain the paradox of value?

  The law explains that scarce goods like diamonds have high marginal utility, while abundant goods like water have low marginal utility, despite their necessity.
• What is consumer surplus?

  Consumer surplus is the difference between the value to buyers and what they actually pay for a good.
• How is consumer surplus represented in a demand curve?

  Consumer surplus is represented by the shaded area under the demand curve, indicating the value buyers place on marginal units purchased.
• What happens to demand for a good when its price is £200?

  Demand for the good is zero at £200.
• If demand rises to 50 million units at £100, what can be inferred about the demand curve?

  The demand curve shows an increase in quantity demanded as price decreases.
• How does the demand curve illustrate the concept of consumer surplus at a price of £60?

  The consumer surplus at £60 is the area between the demand curve and the price level, indicating the value buyers gain.
• How does consumer surplus change when the price decreases from £60 to £40?

  Consumer surplus is larger at £40 compared to £60 because more buyers are willing to pay higher prices for the same quantity.
• What are the key terms related to demand?

  • Conditions of demand
  • Consumer surplus
  • Contraction of demand
  • Demand curve
  • Demand or effective demand
  • Extension of demand
  • Law of diminishing marginal utility
  • Shift in the demand curve
• What does the law of demand state?

  There is an inverse relationship between price and quantity demanded
• What happens to quantity demanded when the price decreases?

  Quantity demanded increases
• If the price of milk decreases to four dollars, what happens to the quantity demanded?

  The quantity demanded increases
• What shape does the demand curve take?

  It is a downward sloping curve
• What are the three reasons why the demand curve is downward sloping?

  • Substitution effect
  • Income effect
  • Law of diminishing marginal utility
• What does the substitution effect imply?

  When the price of milk goes down, people buy more milk instead of other products
• What happens to the quantity demanded for milk when its price increases?

  Quantity demanded decreases
• What does the income effect state?

  When the price of milk decreases, purchasing power increases, leading to more milk bought
• What is the law of diminishing marginal utility?

  As consumption increases, the additional satisfaction from each unit decreases
• How does the law of diminishing marginal utility relate to buying milk?

  Each additional gallon of milk consumed provides less additional satisfaction