Market Economy MCQ 2 (Demand)
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Questions and Answers

What is the impact on demand for a normal good when income rises?

  • Demand rises (correct)
  • There is no impact on demand
  • Demand remains constant
  • Demand falls
  • What is the effect on demand for diesel engine cars if the price of diesel fuel increases?

  • Demand for diesel engine cars remains constant
  • Demand for diesel engine cars decreases (correct)
  • Demand for diesel engine cars increases
  • There is no effect on demand for diesel engine cars
  • Which of the following would cause a rightward shift in demand?

  • A belief that prices will be higher in the future (correct)
  • An increase in advertising
  • A decrease in population
  • A decrease in the availability of credit
  • What is the impact on demand for beef if there is negative publicity about emissions caused by beef production?

    <p>Demand for beef decreases</p> Signup and view all the answers

    What would happen to the demand for public transport if there is an increase in emigration?

    <p>Demand for public transport decreases</p> Signup and view all the answers

    What is the impact on demand for ice cream if there is good weather?

    <p>Demand for ice cream increases</p> Signup and view all the answers

    What happens to the quantity demanded when the price of a good or service falls?

    <p>It increases</p> Signup and view all the answers

    What is the direction of the change in quantity demanded when the price of a good or service rises?

    <p>It decreases</p> Signup and view all the answers

    According to the Law of Demand, what is the relationship between the price of a good or service and the quantity demanded?

    <p>Inversely proportional</p> Signup and view all the answers

    What happens to the quantity demanded when the price of a good or service remains constant?

    <p>It remains constant</p> Signup and view all the answers

    What is the underlying assumption of the Law of Demand?

    <p>Consumers prefer lower prices</p> Signup and view all the answers

    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.

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