On this page you will find few practice question in Economics (Demand) which will enhance your preparation for the forthcoming GCE Exam.
TOPIC: DEMAND
Watch the video tutorial below, for detailed explanation of Demand, then answer the questions that follows, below the video.
Demand is an economic concept that relates to a consumer’s desire to purchase goods and services and willingness to pay a specific price for them. An increase in the price of a good or service tends to decrease the quantity demanded.
Economic demand is the number of consumers willing to purchase goods or services at a certain price. Supply is the other side of demand. Businesses that accurately meet demand with their supply of products or services greatly benefit in profits and heightened brand awareness.
4. Price demand
Price demand relates to the amount a consumer is willing to spend on a product at a given price. Businesses use this information to determine at what price point a new product should enter the market. Consumers will buy items based on their perception of that product’s value. Price elasticity refers to how the demand will change with fluctuations in price.
5. Income demand
As consumers make more income, quantity demand increases. This means people will buy more overall when they earn more income. Tastes and expectations also change with an increase in income, reducing the size of one market and increasing the size of another. Consumers will often buy a product or service because it is what they can afford but may deem it lower quality. The demand for those lower-quality products will decrease as income increases.
Demand is the quantity of consumers who are willing and able to buy products at various prices during a given period of time. Demand for any commodity implies the consumers’ desire to acquire the good, the willingness and ability to pay for it.
Law of Demand
The law of demand governs the relationship between the quantity demanded and the price. This economic principle describes something you already intuitively know. If the price increases, people buy less. The reverse is also true. If the price drops, people buy more.
But the price is not the only determining factor. The law of demand is only true if all other determinants don’t change.
Determinants of Demand
There are five determinants of demand. The most important is the price of the good or service itself. The second is the price of related products, whether they are substitutes or complementary.
Circumstances drive the next three determinants. The first is consumer income, or how much money they have to spend. The second is buyers’ tastes or preferences in what they want to purchase. If they prefer electric vehicles to save on gasoline, then demand for Humvees will drop. The third is their expectations about whether the price will go up. If they are concerned about future inflation they will stock up now, thus driving current demand.
Demand Curve
If you were to plot out how many units you would buy at different prices, then you’ve created a demand curve. It graphically portrays the data that’s been detailed in a demand schedule.
Elasticity of Demand
Demand elasticity means how much more, or less, demand changes when the price does. It’s specifically measured as a ratio. It’s the percentage change of the quantity demanded divided by the percentage change in price.
There are three levels of demand elasticity:
- Unit elastic is when demand changes by the exact same percentage as the price does.
- Elastic is when demand changes by a greater percentage than the price does.
- Inelastic is when demand changes by a smaller percentage than the price does.
ECONOMICS: WAEC GCE PRACTICE QUESTIONS
NOTE: TYPE YOUR ANSWERS INTO THE COMMENT BOX BELOW THESE QUESTIONS, THE CORRECTIONS WILL BE POSTED SOON.
1. When elasticity is zero, the demand curve is
- A. Perfectly elastic
- B. Perfectly inelastic
- C. Concave
- D. Downward slopping
- E. Circular
2. Which of the following factors is not a condition for a change in the supply of a commodity
- A. improved technoly
- B. cost of production
- C. the price of the commodity
- D. government tax policies
3. Two commodities X and Y are in joint supply when
- A. X is a by-product of Y
- B. X and Y are produced by the same firm
- C. increase in the quantity of X leads to a decrease in Y
- D. X and Y cannot be produced in the same process
4. Which of the following factors does not cause a change in demand
- A. Taste and fashion
- B. vagaries of weather
- C. price of other commodities
- D. price of commodity
5. If good P and Q are jointly demanded, an increase in the price of P will likely
- A. leave the demand for Q constant but reduce the quantity demanded of P
- B. reduce the quantity of P but increase the Price of Q
- C. Increase the quantity supplied of Q
- D. decrease the quantity demanded of Q
6. The gap between demand and supply curves above the equilibrium price is
- A. normal demand
- B. excess supply
- C. equil;ibrium quantity
- D. abnormal demand
7. The demand and supply function of a commodity are given as below.
Qd = 20 – 2p
Qs = 6p – 12
Where p = price in naira, Qd = Quantity demanded and Qs = Quantity supplied. The equilibrium price is
- A. 2 Naira
- B. 4 Naira
- C. 6 Naira
- D. 20 Naira
TYPE YOUR ANSWERS INTO THE COMMENT BOX BELOW, THE CORRECTIONS WILL BE POSTED SOON.
