2.2 Demand 2

• What does a shift to the right of the demand curve indicate?

  An increase in demand
• What does a shift to the left of the demand curve indicate?

  A decrease in demand
• What causes the demand curve to shift to the right?

  An increase in demand due to non-price factors
• What causes the demand curve to shift to the left?

  A fall in demand due to non-price factors
• What does a 'change in demand' mean?

  One or more conditions determining demand have changed
• What are some non-price factors affecting demand?

  Income, wealth, price of substitutes, price of complements, tastes and preferences, expectations of future prices, time period
• What is the effect of an increase in income on normal goods?

  • Quantity demanded increases
  • Demand curve shifts to the right
• What is the effect of a decrease in income on inferior goods?

  • Quantity demanded increases
  • Demand curve shifts to the right
• How does a rise in the price of a substitute affect demand?

  It leads to an increase in demand for the product
• How does a fall in the price of a complement affect demand?

  It leads to an increase in demand for the product
• What is the relationship between price and quantity demanded for normal goods?

  There is usually an inverse relationship
• What is the law of demand?

  There is usually an inverse relationship between quantity demanded and price
• What are the types of demand?

  • Joint demand: goods demanded together (complements)
  • Competitive demand: goods in competition with each other (substitutes)
  • Composite demand: goods with multiple uses
• What is the definition of demand?

  The quantity of goods/services that consumers are willing and able to buy at a given price in a given time period
• What is the effect of a fall in the price of a substitute on demand?

  It leads to a decrease in demand for the product
• How do tastes and preferences influence demand?

  They can increase or decrease demand based on consumer perception
• How does the law of diminishing marginal utility relate to demand?

  As more units are consumed, additional satisfaction decreases
• What is marginal utility?

  The additional benefit derived from consuming an additional unit of a product
• What does the term 'utility' refer to?

  The benefit or satisfaction derived from consuming goods and services
• How does a successful marketing campaign affect demand?

  It can lead to an increase in demand for the product
• What is the relationship between income and quantity demanded for inferior goods?

  Quantity demanded increases as income decreases
• What is the formula for cross-price elasticity of demand (XED)?

  Responsiveness of demand for good X to a change in price of good Y
• What is the formula for income elasticity of demand (YED)?

  Responsiveness of demand for a good to a change in income
• What is the impact of a favorable change in tastes/preferences on demand?

  It leads to an increase in demand
• How does the expectation of future price rise affect demand?

  It can lead to an increase in current demand
• How do demographic changes affect demand?

  They can shift the demand curve based on population characteristics
• What is the relationship between price and quantity demanded for inferior goods?

  There is usually an inverse relationship
• What is the effect of a decrease in price on quantity demanded?

  It usually leads to an extension of demand
• What is the effect of an increase in price on quantity demanded?

  It usually leads to a contraction of demand
• What is the definition of joint demand?

  Goods which are interdependent and demanded together
• What is the definition of competitive demand?

  Demand for goods that are in competition with each other
• What is the definition of composite demand?

  Demand for a good that has multiple uses
• How does consumer rationality relate to utility maximization?

  Consumers make choices to maximize total utility subject to price and income
• What is the law of diminishing marginal utility?

  As more units of a good are consumed, additional satisfaction decreases
• What is total utility?

  The total benefit derived from consuming all units of a product
• How does the concept of utility relate to consumer behavior?

  Utility influences consumer choices and demand for products
• How do social and emotional factors influence tastes and preferences?

  They can significantly affect consumer demand through marketing and advertising
• What is the relationship between advertising and demand?

  Effective advertising can increase demand for a product
• How do seasonal changes affect demand?

  They can lead to fluctuations in demand based on consumer behavior
• What is the significance of the utility maximization assumption in economics?

  It underpins consumer behavior and demand theory