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Questions and Answers
What is the impact on demand for a normal good when income rises?
What is the impact on demand for a normal good when income rises?
What is the effect on demand for diesel engine cars if the price of diesel fuel increases?
What is the effect on demand for diesel engine cars if the price of diesel fuel increases?
Which of the following would cause a rightward shift in demand?
Which of the following would cause a rightward shift in demand?
What is the impact on demand for beef if there is negative publicity about emissions caused by beef production?
What is the impact on demand for beef if there is negative publicity about emissions caused by beef production?
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What would happen to the demand for public transport if there is an increase in emigration?
What would happen to the demand for public transport if there is an increase in emigration?
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What is the impact on demand for ice cream if there is good weather?
What is the impact on demand for ice cream if there is good weather?
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What happens to the quantity demanded when the price of a good or service falls?
What happens to the quantity demanded when the price of a good or service falls?
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What is the direction of the change in quantity demanded when the price of a good or service rises?
What is the direction of the change in quantity demanded when the price of a good or service rises?
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According to the Law of Demand, what is the relationship between the price of a good or service and the quantity demanded?
According to the Law of Demand, what is the relationship between the price of a good or service and the quantity demanded?
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What happens to the quantity demanded when the price of a good or service remains constant?
What happens to the quantity demanded when the price of a good or service remains constant?
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What is the underlying assumption of the Law of Demand?
What is the underlying assumption of the Law of Demand?
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Study Notes
Factors Causing a Shift in Demand
- Change in income affects demand differently for normal and inferior goods:
- Normal goods: demand increases when income rises
- Inferior goods: demand decreases when income rises
Substitutes and Complements
- Substitutes: goods that are alternatives to each other, e.g., Coca Cola and Pepsi
- Change in price of substitutes affects demand for the original good
- Complements: goods bought and sold together, e.g., diesel engine cars and diesel
- Change in price of complements affects demand for the original good
Advertising and Consumer Preferences
- Negative publicity: decreases demand, e.g., negative emissions publicity affecting beef demand
- Positive publicity: increases demand, e.g., growing health awareness increasing demand for fitness watches
Future Expectations
- Expectation of lower future prices: shifts demand curve to the left, e.g., Black Friday sales
- Expectation of higher future prices or shortages: shifts demand curve to the right, e.g., toilet paper demand during Covid
Demographic Factors
- Changes in population or market size affect demand, e.g., increased emigration decreasing demand for public transport
Credit Availability
- High availability of credit: leads to higher demand
Unplanned Factors
- Unforeseen events, such as good weather, increase demand for certain products, e.g., ice cream
The Law of Demand
- The law states that there is a direct relationship between the price of a good or service and the quantity demanded.
- As the price of a good or service falls, the quantity demanded will rise.
- Conversely, as the price of a good or service rises, the quantity demanded will fall.
- This law suggests that consumers are more likely to buy a good or service when the price is lower, and less likely to buy when the price is higher.
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Description
Learn about the factors that cause a shift in demand, including changes in income, prices of substitutes and complements, and more.
