Understanding Demand Analysis

What is a demand function?

• A graphical representation of consumer preferences.

• A mathematical equation that describes how the quantity demanded of a good changes with its price.

• An equation that shows the relationship between supply and demand.

• A formula that calculates the total revenue of a business.

Explain the law of demand.

• The law of demand shows that price and quantity demanded are directly related.

• The law of demand indicates that price and quantity demanded are inversely related.

• The law of demand states that higher prices lead to higher quantity demanded.

• The law of demand indicates that quantity supplied increases as price decreases.

What is a demand schedule?

• A demand schedule is a document outlining consumer preferences for a brand.

• A demand schedule is a table that displays the relationship between price and quantity demanded.

• A demand schedule is a graph showing only the quantity supplied.

• A demand schedule is a list of all available products in a market.

How is a demand curve represented graphically?

• A vertical line on a graph with price on the x-axis and quantity on the y-axis.

• A downward-sloping line on a graph with price on the y-axis and quantity on the x-axis.

• A horizontal line on a graph with quantity on the y-axis and price on the x-axis.

• An upward-sloping line on a graph with price on the y-axis and quantity on the x-axis.

List the main reasons behind the law of demand.

• Higher consumer income

• Increased production costs

• Government regulations on prices

• The main reasons behind the law of demand are the substitution effect, income effect, and diminishing marginal utility.

What are exceptions to the law of demand?

• Exceptions to the law of demand include Giffen goods, Veblen goods, essential goods, and addictive goods.

• Normal goods

• Luxury goods

• Substitute goods

How does income affect demand?

• Lower income increases demand for normal goods.

• Higher income decreases demand for all goods.

• Income has no effect on demand for luxury items.

• Higher income generally increases demand for normal goods and decreases demand for inferior goods.

What role do substitutes play in demand?

• Substitutes increase demand for the original product when their prices rise.

• Substitutes only decrease demand for alternatives regardless of price changes.

• Substitutes have no effect on demand for the original product.

• Substitutes increase demand for alternatives when their prices rise and decrease demand for the original product when their prices fall.

Define the term 'elasticity of demand'.

• Elasticity of demand is the fixed quantity of goods supplied regardless of price changes.

• Elasticity of demand refers to the total revenue generated by a product.

• Elasticity of demand is a measure of the responsiveness of quantity demanded to a change in price.

• Elasticity of demand measures the total sales of a product.

What is the difference between individual and market demand?

• Individual demand refers to the total demand in a market.

• Individual demand is for one consumer, while market demand is the total for all consumers.

• Market demand is based on a single consumer's preferences.

• Individual demand is always higher than market demand.