1. What is demand?

demand is comprised of people’s desire, willingness and ability to purchase particular amounts of goods or services at certain prices in a given period of time. So, demand describes the behavior of buyers.

2. What factors alter consumer demand?

What factors alter a consumer’s desire, willingness and ability to pay for products? Some factors include consumers’ income and tastes, the prices and availability of related products like substitutes or complementary goods, and the item’s usefulness. Substitutes are goods that satisfy similar needs and which are normally consumed in place of each other. Complementary goods are those that are normally consumed together (e.g., DVD players and DVD movies).

3. What goods are called substitutes?

Substitutes are goods that satisfy similar needs and which are normally consumed in place of each other. As the price of one substitute declines, demand for the other substitute will decrease. Butter and margarine are close substitutes. If the price of butter goes up, then people will be apt to substitute margarine for butter.

4. What are complementary goods?

5. Complementary goods are those that are normally consumed together (e.g., DVD players and DVD movies). An increase in the price of a product will diminish demand for its complement while a decrease in the price of a product will increase demand for its complement.

6. What does the law of demand state?

The law of demand states that the higher the price of a product, the fewer people will demand that product, that is, demand for a product varies inversely with its price, all other factors remaining equal*. In other words, the higher the price of a product, the lower the quantity demanded.

7. What relationship does the law of demand describe?

The law of demand expresses the relationship between prices and the quantity of goods and services that would be purchased at each and every price. In other words, the higher the price of a product, the lower the quantity demanded.

8. What does a change in price lead to?

The law of demand expresses the relationship between prices and the quantity of goods and services that would be purchased at each and every price. In other words, the higher the price of a product, the lower the quantity demanded.

9. How do factors other than a good’s price affect demand?

All of the non-price determinants (changes in the size of the market, income of the average consumer, population size, the prices and availability of related goods, consumer preferences) are directly related to consumers. In other words, at any given price, consumers will be willing and able to purchase either more or less of a product that depends on its price.

10. What is elasticity as an economic concept?

To understand better the theory of supply and demand it is necessary to know how much buyers and sellers respond to price changes. This responsiveness is called elasticity. Elasticity is an economic concept which is concerned with a shift in either demand for or supply of an economic product as the result of a change in a product’s price.

11. What demand is considered as elastic?

Demand is called elastic if a small change in price has a relatively large effect on the quantity demanded.

12. When demand is said to be inelastic?

Inelastic demand is demand for which a large change in price leads to only a small change in demand.

13. What goods and services is demand inelastic for?

Some essential goods that are relatively inexpensive and for which it is difficult to find substitutes are said to have inelastic demand.

14. Why is demand for necessities inelastic?

Products that are necessities are more insensitive to price changes because consumers will continue buying these products despite a price rise.

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