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Questions and Answers
What factor does NOT influence the demand for green tea according to the considerations for Aroma Tea Limited?
Which statement best defines the relationship between demand and consumer willingness?
Which of the following questions would be least relevant for understanding market demand for green tea?
In the context of Aroma Tea Limited, which consumer segment is most likely to shift to green tea?
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Which aspect of demand does Rajeev Aggarwal NOT directly inquire about in evaluating the green tea market?
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What is a key characteristic of effective demand?
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How is quantity demanded generally expressed?
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Which relationship best describes the price of a commodity and its demand?
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What effect does an increase in the price of a complementary good have on its related good?
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What is the impact of increased disposable income on normal goods?
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How is the demand for a substitute good affected when its price decreases?
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Which statement accurately reflects the nature of demand for complementary goods?
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What does the demand curve typically illustrate about consumer behavior?
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Study Notes
Market Demand & Green Tea
- Aroma Tea Limited is considering diversifying into the green tea market
- The CEO wants to understand market demand for green tea
- Sanjeev Bhandari, the marketing head, is asked about the demand for green tea
- The questions asked relate to the nature of green tea demand, its impact on black tea sales, and the potential consumer base for green tea
What is Demand?
- Demand is the quantity of a good or service that consumers are willing and able to purchase at various prices during a specific time frame
- Demand implies both the willingness and ability to purchase
Effective Demand
- Effective demand is the desire to buy a good, coupled with the means to purchase it, and the willingness to use those means.
- Only effective demand is considered in economic analysis and business decisions.
Quantity Demanded
- The quantity demanded is always expressed at a given price.
- The quantity demanded is a flow, meaning it is expressed over a period of time (e.g., dozens of oranges per day).
- Demand refers to the different quantities consumers are willing to buy in a market during a given period at various prices, taking into account income, and the prices of related goods.
Determinants of Demand
- Price of the Commodity: There is an inverse relationship between price and quantity demanded. Higher prices generally lead to lower demand, and vice versa, assuming all other factors remain constant (ceteris paribus).
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Price of Related Commodities:
- Complementary Goods: The demand for one good increases when the price of a complementary good decreases (e.g., a fall in the price of petrol-driven cars increases demand for petrol). Conversely, an increase in the price of a complementary good reduces demand for the related good.
- Substitute Goods: Demand for a good increases when the price of a substitute good increases (e.g., a fall in the price of tea increases demand for tea and lowers demand for coffee). Conversely, a fall in the price of a particular product decreases the demand for its substitute. This is a direct or positive relationship.
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Disposable Income of the Consumer:
- Normal Goods: There is generally a direct relationship between disposable income and demand for normal goods. An increase in disposable income generally increases demand for normal goods like household furniture, clothing, and automobiles. Conversely, a decrease in income lowers the demand for normal goods.
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Description
This quiz explores the concept of market demand specifically in relation to green tea. It examines factors affecting demand, comparison with black tea, and potential consumer demographics. Participants will enhance their understanding of how demand influences product strategies in the beverage industry.
