1.2.2. demand

• What is demand defined as?

  The ability and willingness to buy a good at a given price
• What does a contraction in demand indicate?

  Quantity demanded falls due to an increase in price
• What does an extension in demand indicate?

  Quantity demanded rises due to a decrease in price
• What are the conditions of demand that cause the demand curve to shift?

  • Population
  • Income
  • Related goods
  • Advertising
  • Taste/fashion
  • Expectations
  • Seasons
  • Government legislation
• What is income elasticity of demand?

  It describes how demand changes with changes in income
• How do substitutes affect demand?

  A change in the price of one good can cause a shift in the demand curve of another
• What happens to demand for Adidas trainers if the price of Nike trainers increases?

  Demand for Adidas trainers increases
• What are complements in terms of demand?

  Goods that are used together, like DVDs and DVD players
• What happens to demand for DVDs if the price of DVD players drops?

  Demand for DVDs is expected to increase
• How does successful advertising affect demand?

  It is likely to increase demand for the advertised product
• How do fashion trends affect demand?

  Increased fashionability leads to increased demand
• How do expectations about the future impact demand?

  Expectations of shortages or price increases can increase demand
• How does weather affect demand for certain products?

  Hot summers increase demand for sun cream, while wet summers decrease demand for umbrellas
• How can government legislation affect demand?

  It can increase demand for goods, such as car seats for children
• What does the law of diminishing marginal utility explain about the demand curve?

  It explains why the demand curve slopes downward

  
• What is total utility?

  The overall satisfaction gained from consuming a good
• What is marginal utility?

  The change in satisfaction from consuming an additional unit of a good
• What does the Law of Diminishing Marginal Utility state?

  Satisfaction from additional units decreases as more is consumed
• Why are consumers less willing to pay high prices at high quantities?

  Because they gain less satisfaction from additional units consumed