Back to notes
List three determinants of demand.
Press to flip
Price of the given commodity, price of related goods, and income of the consumer.
What factors make a commodity's demand highly elastic?
Availability of substitutes and high proportion of income spent on the good.
What causes a rightward shift in the demand curve?
An increase in demand due to factors like an increase in consumer income or positive customer expectations.
What distinguishes demand from desire and want?
Demand requires not just desire and want, but also the willingness and ability to pay for the good.
Explain the concept of substitute goods with an example.
Substitute goods are those that can replace each other; for example, butter and margarine.
Describe a scenario showing movement along the demand curve.
A movement along the demand curve occurs when there is a change in the quantity demanded due to a change in the good's price.
Why is understanding elasticity of demand crucial for businesses?
It helps businesses predict changes in demand in response to price changes, thereby informing pricing strategies.
What impact does 'taste and preferences' have on demand?
Changes in fashion, trends, or preferences can lead to increased or decreased demand for certain goods.
How does the 'size and composition of the population' affect demand?
A larger or more diverse population can increase demand for a wider range of goods and services.
Differentiate between normal goods and inferior goods.
Normal goods see increased demand with increased income, while demand for inferior goods decreases as income rises.
Define price elasticity of demand.
Price elasticity of demand measures how much the quantity demanded of a good responds to a change in the price.
What is the significance of cross elasticity of demand?
Cross elasticity measures how demand for a good is affected by the price change of another related good.
Explain the role of 'income level' in affecting price elasticity of demand.
A higher income level can make demand less elastic because consumers are less sensitive to price changes.
What is meant by 'unitary elastic' demand?
Unitary elastic demand occurs when a change in price leads to a proportionate change in quantity demanded.
What is the definition of demand in microeconomics?
Demand is the quantity of a good that consumers are willing and able to purchase.
Previous
Next