Demand

• What is demand in economics?

  Ability and willingness to buy a good
• What causes movements and shifts of the demand curve?

  • Movement along the curve: price change
  • Shift of the curve: change in demand factors
• What are the conditions of demand?

  • Factors causing demand curve shifts
  • Right shift: increase in demand
  • Left shift: decrease in demand
• How does population affect demand?

  Increased population leads to increased demand (net migration/higher birth rate)
• What happens to demand when income increases for most goods?

  Demand increases as people can buy more
• What is income elasticity of demand?

  Change in demand due to income changes
• How do related goods affect demand?

  Price change of one affects demand for another
• What are substitutes in demand?

  Goods that can replace each other
• What happens to demand for Adidas trainers if Nike trainers' price increases?

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

  Goods that are used together
• What happens to demand for DVDs if DVD player prices drop?

  Demand for DVDs increases
• How does advertising affect demand?

  Successful campaigns increase demand
• What happens to demand if a product becomes more fashionable?

  Demand is expected to increase
• How do expectations influence demand?

  Future expectations can increase or decrease demand
• How does seasonality affect demand?

  Weather changes can increase or decrease demand e.g if in summer demand for ice cream will increase
• How did government legislation affect demand for car seats?

  Increased demand due to legal requirements
• What does the demand curve slope indicate?

  Inverse relationship between price and quantity
• What is total utility?

  Satisfaction from overall consumption of a good
• What is marginal utility?

  Change in satisfaction from next unit consumed
• What does the Law of Diminishing Marginal Utility state?

  Satisfaction decreases as more units are consumed
• Why does the demand curve slope downwards?

  Less satisfaction leads to lower willingness to pay
• How does diminishing marginal utility explain consumer behavior?

  Consumers buy less at higher prices due to less satisfaction
• what causes demand shifts 


  PASIFIC

  • net migration (population)
  • advertising
  • substitutes
  • income
  • interest rate
  • fashion and tastes (if things are trending higher demand)
  • complements
• how do interest rates effect demand

  as interest rates increases demand will decrease as less people taking loans and increase in savings
• if a product's complements decrease in price what will happen to product.

  product will increase in demand