2.2 Demand

• What is the definition of demand in economics?

  willingness and ability to purchase a good at a given price in a given time period
• How does individual demand for a good vary?

  It varies with the price of the good
• What is market demand?

  Total demand for a good from all individuals
• What causes movements along the demand curve?

  Changes in the price of the good
• What is a shift in the demand curve?

  A complete movement of the curve left or right
• What does a movement along the demand curve indicate?

  Price changes affecting quantity demanded
• How do movements and shifts differ in the demand curve?

  Movements are price changes; shifts are curve changes
• What happens to demand when the price decreases?

  Quantity demanded typically increases
• What is the relationship between price and quantity demanded?

  Quantity demanded varies inversely with price
• What is the term for the total demand for a good?

  Market demand
• What does a rightward shift in the demand curve indicate?

  Increased demand for the good
• What does a leftward shift in the demand curve indicate?

  Decreased demand for the good
• What is the effect of a price increase on demand?

  Typically leads to a decrease in quantity demanded
• How do individual and market demand relate?

  Market demand is the sum of individual demands
• What is the significance of the demand curve in economics?

  It illustrates the relationship between price and quantity demanded
• What does a demand curve represent?

  The relationship between price and quantity demanded
• What factors can cause a shift in the demand curve?

  Changes in consumer preferences, income, or prices of related goods
• How does the demand curve react to an increase in consumer income?

  It may shift to the right for normal goods
• What is the impact of a decrease in the price of a substitute good?

  It may decrease the demand for the original good
• What is the term for the graphical representation of demand?

  Demand curve
• What does a demand curve's slope indicate?

  The relationship between price and quantity demanded
• How can external factors influence the demand curve?

  By shifting it due to changes in market conditions
• What is the effect of consumer expectations on demand?

  Expectations can shift demand curves left or right
• What is the primary factor that influences demand?

  Price of the good
• How does advertising affect demand?

  It can increase demand by influencing consumer preferences
• What role do consumer preferences play in demand?

  They directly influence the shape of the demand curve
• What is the relationship between demand and price elasticity?

  Price elasticity measures how demand changes with price
• What does a perfectly elastic demand curve indicate?

  Consumers will only buy at one price
• How do substitutes and complements affect demand?

  Substitutes increase demand; complements decrease it
• What is the significance of the demand curve in market analysis?

  It helps predict consumer behavior and market trends
• What is the primary purpose of analyzing demand?

  To understand consumer behavior and market dynamics
• What does PED stand for in economics?

  Price elasticity of demand
• How is price elasticity calculated?

  Price elasticity = % change in quantity demanded / % change in price
• What does price elasticity of demand measure?

  Responsiveness of quantity demanded to price changes
• What does it mean if demand is price inelastic?


  The change in price is greater than the change in quantity
• What is the value of PED for unitary elastic demand?

  -1
• What are the determinants of price elasticity of demand?

  • Degree of product differentiation
  • Availability of substitutes
  • Branding and brand loyalty
  • Actual or perceived necessity
  • Time
  • Price as a proportion of income
• What is the PED value for perfectly inelastic demand?

  0
• What is the PED range for inelastic demand?

  Between 0 and 1
• What is the PED value for elastic demand?

  Greater than 1