Economics: Supply and Demand

Front

What is the law of demand?

Back

As the price of a good increases, the quantity demanded decreases. There is an inverse relationship between price and quantity demanded.

Front

Give an example of the law of demand.

Back

When the price of ice cream goes up, people buy less ice cream.

Front

What are the determinants of demand?

Back

1. Tastes and preferences 2. Number of buyers 3. Expectations 4. Price of related goods 5. Income

Front

How do tastes and preferences affect demand?

Back

They change over time due to trends, advertising, or personal experiences. For example, increased popularity of plant-based foods affects demand for meat alternatives.

Front

How does the number of buyers affect demand?

Back

More buyers typically lead to higher demand, affected by population growth, demographics, and market expansion. For example, a new housing development increases the number of buyers for local goods.

Front

How do expectations affect demand?

Back

Beliefs about future prices or availability affect current demand. For example, rumors of a new video game console release may decrease demand for current models.

Front

What is the impact of the price of related goods on demand?

Back

Complementary goods are used together, and substitute goods can be used in place of each other. Changes in the price of one good can affect demand for related goods.

Front

How does income affect demand?

Back

For normal goods, demand increases as income rises. For inferior goods, demand decreases as income rises. For example, as income increases, demand for luxury cars may increase, while demand for instant noodles may decrease.

Front

What is the law of supply?

Back

As the price of a good increases, the quantity supplied increases. There is a direct relationship between price and quantity supplied.

Front

Give an example of the law of supply.

Back

When the price of lemonade increases, more people want to sell lemonade.