Business 1.2 Edexcel AS Level

What is effective demand?

• The desire to buy goods

• The willingness and ability to buy goods at a given price

• The total demand of the market

• The demand from high-income consumers

Answer explanation

Effective demand refers to the willingness and ability to buy goods at a given price, distinguishing it from mere desire. This means consumers not only want a product but can also afford it.

What happens to the quantity demanded when the price of a good increases?

• It increases

• It stays the same

• It decreases

• It fluctuates randomly

Answer explanation

When the price of a good increases, consumers typically buy less of it due to the law of demand. Therefore, the quantity demanded decreases.

Which of the following causes a movement along the demand curve?

• A change in income

• A change in the price of the good

• A change in consumer preferences

• A change in the price of substitutes

Answer explanation

A change in the price of the good causes a movement along the demand curve, as it directly affects the quantity demanded. Other options shift the entire demand curve instead.

What does a rightward shift in the demand curve indicate?

• A decrease in demand

• A movement along the demand curve

• An increase in demand

• A decrease in supply

Answer explanation

A rightward shift in the demand curve indicates an increase in demand, meaning consumers are willing to buy more of a good at each price level.

If the price of a substitute good increases, what happens to the demand for the related good?

• It decreases

• It stays the same

• It increases

• It becomes perfectly inelastic

Answer explanation

When the price of a substitute good increases, consumers tend to buy more of the related good instead, leading to an increase in its demand. Therefore, the correct answer is that the demand for the related good increases.

What effect does an increase in consumer income generally have on the demand for normal goods?

• Decreases demand

• No effect on demand

• Increases demand

• Decreases supply

Answer explanation

An increase in consumer income typically leads to higher purchasing power, which generally increases the demand for normal goods, as consumers are more willing and able to buy more of these goods.

Which factor does NOT lead to a shift in the demand curve?

• Change in income

• Change in the price of complements

• Change in the cost of production

• Change in consumer preferences

Answer explanation

The cost of production affects supply, not demand. Changes in income, prices of complements, and consumer preferences directly influence demand, causing the demand curve to shift.

What is the effect of seasonality on demand?

• It decreases demand for all products

• It only affects demand in the winter

• It causes demand to vary at different times of the year

• It makes demand perfectly elastic

Answer explanation

Seasonality affects demand by causing it to fluctuate throughout the year, with certain products experiencing higher demand in specific seasons. Thus, the correct choice is that it causes demand to vary at different times of the year.

What is the likely impact of an effective advertising campaign on demand?

• Shift the demand curve to the left

• Shift the demand curve to the right

• Decrease demand

• Increase supply

Answer explanation

An effective advertising campaign typically increases consumer awareness and interest, leading to higher demand for the product. This results in a rightward shift of the demand curve, indicating increased demand at all price levels.

How does a decrease in the price of complementary goods affect demand?

• It increases demand for both goods

• It decreases demand for the complement

• It has no effect on demand

• It decreases supply

Answer explanation

A decrease in the price of complementary goods makes them more affordable, leading to an increase in demand for both the complementary goods and the original good, as consumers are likely to purchase more of both.