Demand and Supply: Key concepts amd Determinants in Economics

What is the definition of demand?

Demand refers to the quantity of a good or service that consumers are willing and able to purchase at different prices over a given period of time.

What is effective demand?

Effective demand is demand that is supported by purchasing power.

What are the main determinants of demand?

The main determinants are the price of the good, prices of related goods, consumer income, expected future price, and other factors like tastes, advertising, population and government policies.

What does the law of demand state?

The law of demand states that there is an inverse relationship between price and quantity demanded.

What is the income effect?

The income effect indicates that higher prices reduce consumers’ purchasing power, leading them to buy less of the goods.

What is the substitution effect?

The substitution effect occurs when a good becomes relatively more expensive, prompting consumers to switch to cheaper substitute goods.

What is a demand schedule?

A demand schedule is a table showing the quantity demanded at different prices.

What is a demand curve?

A demand curve is the graphical representation of the demand schedule, typically downward sloping from left to right.

What is market demand?

Market demand is obtained by horizontally summing the demand of all individual consumers at each price.

What is the difference between quantity demanded and demand?

Quantity demand refers to the amount consumers buy at a particular price, while demand refers to the entire relationship between price and quantity demanded.

What happens to demand when the price of a substitute good increases?

The demand for the related substitute good increases, shifting the demand curve to the right.

What happens to demand when the price of a complementary good increases?

The demand for the complementary good decreases shifting the demand curve to the left.

How do normal goods respond to changes in income?

As income increases, demand for normal goods increases, shifting the demand curve to the right; as income decreases, demand decreases, shifting the curve to the left.

How do inferior goods respond to changes in income?

As income increases, demand for inferior goods decreases, shifting the demand curve to the left; as income decreases, demand increases, shifting the curve to the right.

What is the impact of expected future prices on current demand?

If consumers expect future prices to rise, current demand increases, shifting the demand curve to the right; if prices are expected to fall, current demand decreases, shifting the curve to the left.

What is a movement along the curve?

A movement along the demand curve occurs when only the price of the good changes, resulting in a change in quantity demanded.

What causes a shift of the demand curve?

A shift of the demand curve occurs due to changes in income, prices of related goods, consumer preferences, or expected future prices.

What happens to demand for yoga mats if the price of yoga studios doubles?

The demand for yoga mats decreases because they are complementary goods, shifting the demand curve to the left.

What happens to demand for online yoga classes if yoga studio fees increase?

The demand for online yoga classes increases as they become substitutes, shifting the demand curve to the right.

What is the effect of a recession on demand for inferior goods?

During a recession, demand for inferior goods like instant noodles increases, shifting the demand curve to the right.

What is the effect of removing petroleum subsidies on current demand for petrol?

If consumers expect petroleum prices to increase after subsidies are removed, current demand for petrol increases, shifting the demand curve to the right.