1.2.1 The determinants of demand

• Demand refers to the quantity of a good or service consumers are willing and able
• What is the relationship between price and demand according to the Law of Demand?

  Inverse
• Arrange the determinants of demand in order from most to least direct influence on demand:

  1️⃣ Price

  2️⃣ Income

  3️⃣ Tastes

  4️⃣ Expectations

  5️⃣ Number of buyers
• Demand is influenced only by price and income.

  False
• What mathematical notation represents demand as a function of price?

  $D =$$f(P)$
• If the price of coffee decreases, consumers might buy more due to its increased affordability
• Higher prices for laptops increase their demand.

  False
• How does increased income affect demand for luxury cars?

  Increases it
• Trends and preferences influence demand through changes in tastes
• What happens to demand if consumers anticipate a sale on shoes?

  Increases before sale
• The Law of Demand states that as price increases, demand also increases.

  False
• The Law of Demand can be mathematically expressed as Q_{d} = f(P)</latex>
• What might consumers do if the price of coffee increases from $2 to $3 per cup?

  Reduce consumption
• What happens to the demand for normal goods when income increases?

  Increases
• Inferior goods are those whose demand decreases as income
• The mathematical relationship for normal goods is \frac{\Delta Q_{d}}{\Delta I} > 0</latex>.
• What happens to the demand for generic pasta if consumer income rises?

  Decreases
• If the price of a substitute good increases, demand for the original product rises
• If the price of coffee makers rises, demand for coffee beans may increase.

  False
• What is the key relationship between price and quantity demanded according to the Law of Demand?

  Inverse relationship
• Mathematically, the Law of Demand is expressed as $Q_{d} =$$f(P)$
• Higher income increases demand for inferior goods.

  False
• Match the type of good with its income effect:

  Normal good ↔️ $\frac{\Delta Q_{d}}{\Delta I} > 0$

  Inferior good ↔️ $\frac{\Delta Q_{d}}{\Delta I} < 0$
• What happens to the demand for coffee if the price of tea increases?

  Demand for coffee rises
• If the price of coffee makers rises, the demand for coffee beans may decrease.
• What does the variable $T$ represent in the equation $Q_{d} =$$f(T)$?


  Tastes and preferences
• Anticipations about future prices or availability can significantly impact current demand
• An increase in the number of buyers typically leads to higher demand.