Law of Demand Flashcards
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Questions and Answers

What does demand refer to?

  • The quantity of a product supplied to the market.
  • The total cost of producing a good.
  • How much of a product or service is desired by buyers at a certain time. (correct)
  • The overall market size for a product.
  • What is the Law of Demand?

    The Law of Demand states that an increase in the price of a good lowers the quantity demanded, while a decrease in price raises the quantity demanded.

    What is a demand schedule?

    A table showing the quantity of a good buyers would purchase at each price.

    What does a demand curve represent?

    <p>The graphical representation of the demand schedule.</p> Signup and view all the answers

    What are the two types of movement of the demand curve?

    <p>Caused by non-price factors</p> Signup and view all the answers

    What happens when there is a change in the product's price?

    <p>It results in a movement along the demand curve.</p> Signup and view all the answers

    What results from non-price factors affecting demand?

    <p>It results in a shift of the demand curve.</p> Signup and view all the answers

    What does a rightward shift in the demand curve represent?

    <p>An increase in aggregate demand.</p> Signup and view all the answers

    What does a leftward shift in the demand curve signify?

    <p>A decrease in aggregate demand.</p> Signup and view all the answers

    How does income affect demand?

    <p>A buyer's income has a positive effect on demand.</p> Signup and view all the answers

    What effect does population have on demand?

    <p>When the population increases, demand for goods and services is expected to increase.</p> Signup and view all the answers

    How can consumer taste affect demand?

    <p>Consumer taste varies with factors such as age, gender, and situation.</p> Signup and view all the answers

    How can the prices of related goods influence demand?

    <p>The demand for a good can depend on the prices of complementary and substitute goods.</p> Signup and view all the answers

    What are complementary goods?

    <p>Goods that are used together, like flashlights and batteries.</p> Signup and view all the answers

    What are substitute goods?

    <p>Goods that can replace each other, like beef and pork.</p> Signup and view all the answers

    What happens when buyers expect prices of commodities to rise?

    <p>Some will buy more than needed to take advantage of current prices.</p> Signup and view all the answers

    Study Notes

    Demand Overview

    • Demand reflects the quantity of a product or service that buyers wish to purchase in a specified time frame.
    • Demand exists for a good or service when it provides pleasure or fulfills a need.

    The Law of Demand

    • The Law of Demand indicates that an increase in price leads to a decrease in quantity demanded; conversely, a decrease in price results in an increase in quantity demanded.
    • This law highlights the inverse relationship between price and quantity demanded.

    Demand Schedule and Curve

    • A Demand Schedule is a tabular representation illustrating the quantities buyers are willing to purchase at various price points.
    • A Demand Curve visually represents the Demand Schedule graphically.

    Movements of the Demand Curve

    • Movements along the Demand Curve occur due to changes in the product's price, affecting the quantity demanded.
    • Non-price factors lead to shifts in the Demand Curve, resulting in a new Demand Curve formation.

    Shift Directions in Demand

    • A rightward shift indicates an increase in overall demand.
    • A leftward shift signifies a decrease in overall demand.

    Factors Affecting Demand

    • Income positively influences demand; as buyers' income increases, demand typically increases as well.
    • Population growth is correlated with increased demand for goods and services, expanding the market size.

    Consumer Preferences

    • Consumer taste is influenced by demographic factors such as age, gender, habits, and situational changes.
    • The demand for a product can be swayed by the prices of related goods, which are categorized into:

      • Complementary Goods: Goods that are used together. For example, an increase in flashlight prices leads to a decline in battery demand.

      • Substitute Goods: Goods that can replace one another. For instance, if beef prices rise, the demand for pork may increase.

    Buyer Expectations

    • Anticipation of rising prices for essential commodities can prompt buyers to purchase more now, resulting in increased present demand.
    • Expecting future income increases can similarly boost current consumption levels as buyers prepare for upcoming financial changes.

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    Description

    This quiz focuses on the fundamental concepts of the Law of Demand, including definitions of demand and the effects of price changes on quantity demanded. Ideal for students looking to solidify their understanding of basic economic principles.

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