Cambridge International as and a level Economics Ebook

SELF-ASSESSMENT TASK 
2.2
Using
 Figure 2.1 
and
 Table 2.1,
answer the following 
questions:
1 
How many PCs per week are people willing and 
able to buy if the price is $1,100?
2 
What price will persuade people to buy 1,350 PCs 
per week?
3 
What assumptions are you making when you 
answer these questions?
SELF-ASSESSMENT TASK 
2.3
Using 
Figure 2.1,
 explain how the area under the 
demand curve could be used to show the total 
consumer expenditure/total revenue of the fi rms 
selling PCs.
Factors influencing demand
Th
e price of a good or service is not the only factor that 
infl uences demand. Th
ere are others including:
■ 
Income: The ability to pay is vital when considering the 
importance of eff ective demand. For any individual, the 
demand for goods and services invariably depends upon 
income. (Usually this is taken to mean what a person has left
aft er tax has been deducted). In terms of market demand, 
it refers to the income of all consumers and is invariably 
related to the state of the macroeconomy.
In general, there is a positive relationship between income 
and demand. An increase in the ability to pay usually leads 
to an increase in demand. Conversely, if the ability to pay 
falls then less is demanded. Goods and services that are 
characterised by this relationship are called 
normal goods
. 
Most products are like this and include things like cars, 
restaurant meals, quality clothing, etc.
For some products, however, there is a negative relationship, 
with less being purchased as income rises. These are called 
inferior goods
. Typical examples are poor quality foodstuff s; 
as consumers become better-off , they are more likely to buy 
less of these and, instead, purchase more fish, meat and 
premium priced foods with their increased income.
■ 
Price and availability of related products: Two particular 
categories can be identified. First,