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Questions
Define demand. Name the factors affecting market demand.
Name the factors affecting demand for a good by an individual.
Solution
Demand refers to the desire to buy a good backed with sufficient purchasing power and the willingness to spend.
Factors determining the market demand of a commodity:-
1. Own price of good:- Assume that other things remain constant, an increase in the price of a good will decrease the demand for a good, and a decrease in the price of a good will increase the demand for a good. There is an inverse relationship between the price of a good and the demand for a good.
2. Price of other goods:- Demand for a commodity is influenced by a change in the price of other goods. When the price of one good falls, it becomes cheaper in relation to another good.
If there is an increase in the price of the substitute good coffee, then the demand curve for tea shifts to the right. On the other hand, if there is a decrease in the price of the substitute good coffee, the demand curve for tea shifts to the left even when its price is constant.
If there is an increase in the price of a good, then the demand for another good will decline. So, the demand curve shifts parallel to the left. On the other hand, if there is a decrease in the price of a good, then the demand for another good will increase and so the demand curve shifts parallel to the right.
3. Income of consumers:- A change in income causes a change in demand for good based on the variety of goods available in the market. There will be an increase in the demand for normal goods with a rise in income level. On the other hand, the demand will decrease for inferior goods with an increase in income.
4. Consumer's tastes and preferences:- Assume that other things remain constant, if consumers have more preference for a good than other goods, then the demand for those goods will increase. On the other hand, if consumers have no preference for a good than other goods, then the demand for those goods will decrease.
5. Population size:- An increase or decrease in population size will influence the demand for goods in the market. There is a positive relationship between the size of population and the demand for a good.
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RELATED QUESTIONS
Demand for necessaries is................
(elastic / inelastic / infinitely elastic / unitary elastic)
What is meant by inelastic demand?
The demand of a commodity, when measured through the expenditure approach, is inelastic. A fall in its price will result in : (choose the correct alternative)
(a) No change in expenditure on it.
(b) Increase in expenditure on it.
(c) Decrease in expenditure on it.
(d) Anyone of the above.
Demand for a good is termed inelastic through the expenditure approach when if (choose the correct alternative)
a) Price of good falls, expenditure on it rises
b) Price of the good falls, expenditure in it falls
c) Price of the good falls, expenditure on it remains unchanged
d) Price of the good rises, expenditure in it falls
Demand deposits include (choose the correct alternative)
(a) Saving account deposits and fixed deposits
(b) Saving account deposits and current account deposits
(c) Current account deposits and fixed deposits
(d) All types of deposits
When is demand called perfectly inelastic?
Give reason or Explain the following statement :
Demand for habitually used goods is inelastic.
Define or explain the following concept :
Effective demand .
State whether the following statement is true or false.
Perfectly inelastic demand curve is parallel to ‘X’ axis.
Write whether the following statement is True or False:
Demand curve has a positive slope.
Distinguish between :
Individual demand schedule and Market demand schedule.
Fill in the blank with appropriate alternatives given below:
When less is purchased at the constant price, it is called _______ in demand.
Distinguish between Desire and Demand.
Distinguish between normal goods and inferior goods, with examples
Good X and Good Y are substitute goods. If price of Good X increases, discuss briefly its likely impact on the demand for Good Y.
There is a sudden change in climatic conditions resulting in hot weather. Assuming no change in the price of the cold drinks, it will lead to ______
Which of the following statement is true?
"Market demand curve is constructed by horizontally summing all the individual's demand curves at each and every price." Choose the correct option for the above-mentioned statement.
Which of the following is the reason behind the downward slope of demand option?
