REVIEW 2.3 Demand.

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Presentation transcript:

REVIEW 2.3 Demand

DEMAND – the quantity buyers are willing and able to buy at a given price in a given time. EFFECTIVE DEMAND- For demand to be effective a consumer must be both willing and able to buy the good or service CONTRACTION OF DEMAND- the fall in the quantity demanded due to a rise in price. EXTENSION OF DEMAND – the increase in quantity demanded due to a fall in price.

A-C = Contraction – Rise in price. A-B = Extension – Fall in price. EXAM QUESTIONS – 2010 , Q2 (3)

INCREASE/DECREASE IN Demand REVIEW 2.4 INCREASE/DECREASE IN Demand

D1 – D3 = INCREASE D1 – D2= DECREASE

Inferior Good – Goods for which the demand falls when income rises. PASIFIC Population – Increase in population will cause an increase in demand. Right shift. Also includes the composition (age) Advertising – Good advertising will cause an increase in demand. Right shift Substitutes (price of)- If the price of substitutes goes down it’s a fall in demand. Left shift. Income – If income increases demand increases. Right shift (normal goods) Left shift(inferior goods) Fashion- In fashion- increase in demand. Right shift Interest Rates – If interest rates rise then there’s a decrease in demand. Left shift. Complements- If the price of complements go up, demand goes down. Left shift

Past paper questions Specimen paper – Q8 (8) 2012 – Q1d (8)