IGCSE ECONOMICS (EDEXCEL) 1.1
(THE MARKET SYSTEM)
, name the factors of demand - ANSWERSadvertising, income, interest rates, fashion,
population, price of complements, price of substitutes
explain how advertising affects demand - ANSWERSa good advertising campaign
keeps the good being sold on the minds of its buyers; if a company does not advertise,
it will soon be forgotten and stop being competitive
explain how income affects demand - ANSWERSwhen income rises, a normal good's
demand rises too, however demand for inferior goods drops; when income drops,
demand for normal goods drops and demand for inferior goods rises; people have a
higher disposable income
explain how interest rates affect demand - ANSWERSas interest rates increase,
demand for goods decreases because it is more expensive to borrow money to buy
goods; as interest rates decrease, it is cheaper for people to borrow money, so they buy
more things and demand increases
explain how fashion affects demand - ANSWERSwhen things are fashionable, demand
for them is very high, because everyone wants to have that good; however, when they
go out of fashion, demand falls sharply
explain how population affects demand - ANSWERSas population increases, demand
does too; this is because a population increase means that there are more people
willing and able to buy a good
define "normal good" - ANSWERSa normal good is a good that has an increase in
demand when a population's income increases
define "inferior good" - ANSWERSan inferior good is a good that has a decrease in
demand when a population's income increases
explain how the price of substitutes for a good affects demand - ANSWERSwhen a the
price of a good's substitutes (eg. Pepsi) decreases, the original good (eg. Coca-Cola)
has a decrease in demand because a lower number of people want to spend that much
of their money on the good
explain how the price of complements for a good affects demand - ANSWERSwhen a
complementary good has a price increase, demand for the good it complements
decreases; for example, if the price of a games console increases, demand for its
games decreases because less people are buying the console, so less people need its
games
(THE MARKET SYSTEM)
, name the factors of demand - ANSWERSadvertising, income, interest rates, fashion,
population, price of complements, price of substitutes
explain how advertising affects demand - ANSWERSa good advertising campaign
keeps the good being sold on the minds of its buyers; if a company does not advertise,
it will soon be forgotten and stop being competitive
explain how income affects demand - ANSWERSwhen income rises, a normal good's
demand rises too, however demand for inferior goods drops; when income drops,
demand for normal goods drops and demand for inferior goods rises; people have a
higher disposable income
explain how interest rates affect demand - ANSWERSas interest rates increase,
demand for goods decreases because it is more expensive to borrow money to buy
goods; as interest rates decrease, it is cheaper for people to borrow money, so they buy
more things and demand increases
explain how fashion affects demand - ANSWERSwhen things are fashionable, demand
for them is very high, because everyone wants to have that good; however, when they
go out of fashion, demand falls sharply
explain how population affects demand - ANSWERSas population increases, demand
does too; this is because a population increase means that there are more people
willing and able to buy a good
define "normal good" - ANSWERSa normal good is a good that has an increase in
demand when a population's income increases
define "inferior good" - ANSWERSan inferior good is a good that has a decrease in
demand when a population's income increases
explain how the price of substitutes for a good affects demand - ANSWERSwhen a the
price of a good's substitutes (eg. Pepsi) decreases, the original good (eg. Coca-Cola)
has a decrease in demand because a lower number of people want to spend that much
of their money on the good
explain how the price of complements for a good affects demand - ANSWERSwhen a
complementary good has a price increase, demand for the good it complements
decreases; for example, if the price of a games console increases, demand for its
games decreases because less people are buying the console, so less people need its
games
