7 Questions
What is demand in economics?
The amount of a good or service consumers are both willing and financially able to buy at a given price during a period of time
The law of demand states that the quantity demanded of a commodity will be larger at higher market prices.
False
What influences demand?
Utility
The law of diminishing marginal utility states that the extra (marginal) units consumed of any good or service usually yield less and less additional ____________________.
utility
Match the following concepts with their definitions:
Demand = The amount of a good or service consumers are both willing and financially able to buy at a given price during a period of time Utility = The satisfaction people get from consuming or using a good or service Law of Demand = The quantity demanded of a commodity will be smaller at higher market prices and larger at lower market prices Law of Diminishing Marginal Utility = The extra (marginal) units consumed of any good or service usually yield less and less additional utility
Why do people resent having to pay the same price for each extra unit of a good or service?
Because they get less satisfaction from each extra unit
The utility of a good or service is constant.
False
Study Notes
Demand
- Demand is the amount of a good or service that consumers are both willing and financially able to buy at a given price during a period of time.
- Effective demand requires both the desire and financial ability to purchase a good or service.
- Many people may want a luxury item, but if they cannot afford it, there is no effective demand for it.
Law of Demand
- The law of demand states that, ceteris paribus (all other things being equal), the quantity demanded of a commodity will be smaller at higher market prices and larger at lower market prices.
Utility and Demand
- Demand is influenced by the utility of a good or service, which is the satisfaction people get from consuming or using it.
- The law of diminishing marginal utility states that the extra units consumed of any good or service usually yield less and less additional utility.
- As marginal utility decreases, consumers are less willing to pay the same price for each additional unit, requiring a lower price to entice them to buy more.
Learn about the concept of demand in economics, including effective demand and the law of demand. Understand the difference between wanting a product and being able to afford it.
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