Question

What is the Law of Demand?

What factors cause the Demand Curve to shift? There are five.

What is the difference between a change in Demand and a change in Quantity Demanded?

Draw graphs illustrating 1) an increase in Demand and 2) increase in Quantity Demanded? Label your axis! . If you can’t figure out how to post graphs, describe what they would look like.

What causes a change in Quantity Demanded?

What is the difference between a Normal Good and an Inferior Good? Give an example of each.

Why is the market system also referred to as the price system?

Answer 1

1.The Law of demand states that other things remaining the same ,there is an inverse relationship between the price of the commodity and the quantity demanded. Whenever,there is an increase in the price of the commodity ,the quantity demanded decreases and vice-versa.

2.Factors causing demand curve to shift-

a.Substitute Goods, such as tea and coffee.  An increase in the price of one good raises the demand of the other good causing the demand cuirve to shift towards right.and vice-versa.

b.Complementary Goods,such as tea and sugar -  An increase in the price of one reduces the demand of other causing the demand curve to shift towards left and vice-versa.

c.Income of Consumer-An increase in income of the consumer increases the demand for the normal good causing the demand curve to shift towards rightand vice-versa.

d.Taste and preferences- Favourable taste and preferences for a product causes the demand curve to shift towards right and vice-versa.

e. Population-An increase in population tend to increase the demand causing the demand curve to shift towards right and vice-versa.

3.

Change in demand - Increase or decrease in demand due to change in factors other than price like chnage in price of related price of related good, the income etc. is known as chnage in demand. It causes the entire demand curve to shift.

Chnage in quantity demanded - Other thingsbeing remain constant, an increase or decrease in quantity demanded of a commodity due to fall or rise in price of a commodity is known as chnage in qiantity demanded. It is shown by the movement along the demand curve.

4.