Questions and Answers
What are the six Factors of Demand?
What is Factor 1: Income?
A person's ability to buy goods changes as his/her income changes.
What is Factor 2: Market Size?
As the number of consumers in an area changes, so does the market size.
What is Factor 3: Consumer Taste?
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What is Factor 4: Consumer Expectations?
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What is Factor 5: Substitutes?
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What is Factor 6: Complements?
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What is a negative effect on Income?
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What is the negative effect of Market Size?
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What is the negative effect of Consumer Taste?
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What is the negative effect on Consumer Expectations?
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What are the negative effects of Substitutes?
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What are the negative effects of Complements?
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What is a positive effect on Income?
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What is a positive effect on Market Size?
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What is a positive effect on Consumer Taste?
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What is a positive effect on Consumer Expectations?
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What is a positive effect on Substitutes?
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What is a positive effect on Complements?
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Study Notes
Six Factors of Demand
- The six key factors influencing demand are: Income, Market Size, Consumer Taste, Consumer Expectations, Substitutes, and Complements.
Factor 1: Income
- An individual's purchasing power is directly linked to their income.
- Changes in income can lead to shifts towards normal goods or inferior goods.
Factor 2: Market Size
- Demand increases or decreases as the number of consumers in a market expands or contracts.
- A larger market size typically leads to increased overall demand.
Factor 3: Consumer Taste
- Trends and preferences affect product popularity over time.
- A shift in consumer tastes can cause a drop in demand for certain items.
Factor 4: Consumer Expectations
- Anticipations about future prices and availability impact consumers’ current purchasing decisions.
- Positive expectations can encourage spending, while negative ones can hinder it.
Factor 5: Substitutes
- Substitutes are products that can replace one another.
- A decrease in the price of substitutes can lead to a decline in demand for the original product.
Factor 6: Complements
- Complementary goods are items that are often used together.
- An increase in the price of one product can reduce demand for its complement.
Negative Effects on Demand
- A decrease in income leads to reliance on inferior goods, decreasing demand for normal goods.
- Shrinking market size results in varying demand based on fewer consumers.
- Changes in consumer taste can negatively impact the demand for specific products.
- Negative consumer expectations can result in product underperformance and reduced demand.
- Lower priced substitutes draw consumers away from more expensive options.
- Rising prices of one product can diminish demand for its complementary goods.
Positive Effects on Demand
- Increased consumer income typically enhances demand for various products.
- An expanding market size results in higher demand due to more potential buyers.
- Positive consumer desire boosts demand for products that align with their preferences.
- Favorable expectations encourage consumers to purchase products perceived as high quality.
- Rising prices of original products can lead to increased demand for substitutes.
- An increase in the demand for one good generally leads to an increase in demand for its complements.
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Description
This quiz focuses on the six key factors that influence demand in economics. From income to consumer expectations, each factor plays a crucial role in understanding market dynamics. Use these flashcards to test your knowledge and enhance your grasp of demand-related concepts.