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insufficient.","correct":true,"explanation":"Effective demand requires both wanting the good and having sufficient purchasing power to buy it. A desire without the ability to pay remains potential demand, not effective demand."},{"text":"Desire and knowledge of the product - income is unnecessary.","correct":false,"explanation":"Knowing about a product does not create effective demand without purchasing power. The correct requirement is willingness and ability to pay, because desire alone cannot result in a purchase."},{"text":"Ability to pay only - willingness is unnecessary.","correct":false,"explanation":"Having money does not mean a buyer will purchase the good. Effective demand requires both willingness and ability to pay, so omitting willingness makes this answer incomplete."},{"text":"Willingness to pay only - income is unnecessary.","correct":false,"explanation":"A buyer may want a good but be unable to afford it. Effective demand requires willingness and ability to pay, since an unfinanced desire cannot become actual demand."}]},{"id":"6d223d73-9d28-42c6-891b-3511317bd75a","cardType":"basic","points":1,"front":"What does the law of demand predict when a good's own price rises, ceteris paribus?","back":"Quantity demanded falls.","mcqOptions":[{"text":"Quantity demanded falls.","correct":true,"explanation":"With other conditions unchanged, a higher own price reduces the quantity buyers are willing and able to purchase. This is the inverse relationship described by the law of demand."},{"text":"Quantity demanded rises.","correct":false,"explanation":"This reverses the law of demand. Ceteris paribus, a rise in the good's own price causes quantity demanded to fall, represented by movement upwards along the demand curve."},{"text":"Demand shifts right.","correct":false,"explanation":"An own-price change does not shift the demand curve. It causes a movement along the same curve, and a price rise reduces quantity demanded."},{"text":"Quantity demanded stays constant.","correct":false,"explanation":"Quantity demanded changes when the good's own price changes, assuming other conditions remain constant. A price rise causes quantity demanded to fall rather than remain unchanged."}]},{"id":"b7f425ca-0856-45d2-9a3c-b9314fdd12b0","cardType":"basic","points":1,"front":"What does the law of demand predict when a good's own price falls, ceteris paribus?","back":"Quantity demanded rises.","mcqOptions":[{"text":"Quantity demanded rises.","correct":true,"explanation":"With other conditions unchanged, a lower own price makes buyers willing and able to purchase a greater quantity. This follows the inverse relationship in the law of demand."},{"text":"Quantity demanded falls.","correct":false,"explanation":"This reverses the law of demand. Ceteris paribus, a fall in the good's own price increases quantity demanded, shown as movement downwards along the demand curve."},{"text":"Demand shifts left.","correct":false,"explanation":"An own-price fall does not shift the demand curve. It creates a movement along the existing curve, increasing quantity demanded rather than changing demand itself."},{"text":"Quantity demanded stays constant.","correct":false,"explanation":"The quantity demanded responds to a change in the good's own price. Holding other conditions constant, a price fall increases quantity demanded instead of leaving it unchanged."}]},{"id":"fb4ecdab-8bd4-448b-8287-a28ab81a9bca","cardType":"basic","points":1,"front":"What type of relationship exists between price and quantity demanded?","back":"An inverse relationship.","mcqOptions":[{"text":"An inverse relationship.","correct":true,"explanation":"Price and quantity demanded move in opposite directions, with other conditions held constant. A higher price reduces quantity demanded, while a lower price increases it."},{"text":"A direct relationship.","correct":false,"explanation":"A direct relationship would mean price and quantity demanded rise or fall together. Demand instead shows an inverse relationship: a higher price generally lowers quantity demanded."},{"text":"A constant relationship.","correct":false,"explanation":"A constant relationship would imply that quantity demanded does not respond to price. The law of demand states that price and quantity demanded have an inverse relationship."},{"text":"A proportional relationship.","correct":false,"explanation":"Demand does not require price and quantity demanded to change by the same percentage. Their relevant relationship is inverse, meaning they move in opposite directions."}]},{"id":"8837e914-be17-40ec-bef6-899868f4c3f8","cardType":"basic","points":2,"front":"Why does a demand curve slope downward from left to right?","back":"A lower price attracts more buyers and increases the quantity each buyer purchases.","mcqOptions":[{"text":"A lower price attracts more buyers and increases the quantity each buyer purchases.","correct":true,"explanation":"As price falls, more consumers can afford the good and existing buyers tend to purchase more. These responses create the downward slope from left to right."},{"text":"A higher price attracts more buyers and increases the quantity each buyer purchases.","correct":false,"explanation":"Higher prices usually discourage buyers and reduce their purchasing power. A lower price attracts more buyers and increases each buyer's quantity purchased, producing the downward slope."},{"text":"A lower price shifts demand left and reduces the quantity each buyer purchases.","correct":false,"explanation":"A lower price causes movement along the demand curve rather than a leftward shift. It generally attracts more buyers and increases the quantity each buyer purchases."},{"text":"A fixed price keeps total demand unchanged for every quantity purchased.","correct":false,"explanation":"The curve shows different quantities demanded at different prices, not one fixed price with unchanged demand. Lower prices generally increase both participation and purchases per buyer."}]},{"id":"830c2e1f-78f4-43b2-b6bb-f27638792a58","cardType":"basic","points":1,"front":"What happens to a buyer's real income when the price of a good falls?","back":"Their real income rises because the same money buys more.","mcqOptions":[{"text":"Their real income rises because the same money buys more.","correct":true,"explanation":"A fall in price increases the purchasing power of unchanged money income. The buyer can afford more goods, so their real income or real spending power rises."},{"text":"Their real income falls because the good becomes less valuable.","correct":false,"explanation":"A lower price increases, rather than reduces, purchasing power. The same money can buy more, so real income rises even though the good's money price has fallen."},{"text":"Their money income rises because the good is cheaper.","correct":false,"explanation":"A price fall does not automatically increase the buyer's money income. It raises real income because unchanged money income purchases more goods."},{"text":"Their real income stays constant because wages are unchanged.","correct":false,"explanation":"Real income concerns purchasing power, not just the number of pounds earned. Even with unchanged wages, a lower price means the same money buys more."}]},{"id":"9e47d36f-13dc-4a16-ae07-3973daf69f54","cardType":"basic","points":2,"front":"How does the income effect increase quantity demanded after a price fall?","back":"The lower price raises real spending power, allowing the buyer to purchase more.","mcqOptions":[{"text":"The lower price raises real spending power, allowing the buyer to purchase more.","correct":true,"explanation":"When the price falls, unchanged income has greater purchasing power. This increase in real spending power enables the buyer to afford a larger quantity of the good."},{"text":"The lower price reduces real spending power, forcing the buyer to purchase less.","correct":false,"explanation":"The income effect works in the opposite direction here. A lower price increases real spending power, allowing the buyer to purchase more with the same income."},{"text":"The lower price raises money income, allowing the buyer to purchase more.","correct":false,"explanation":"The buyer's money income does not change merely because a price falls. The relevant change is higher real spending power, which permits greater purchases."},{"text":"The lower price raises real spending power, forcing the buyer to purchase less.","correct":false,"explanation":"The first part describes higher purchasing power, but the consequence is reversed. Greater real spending power normally enables the buyer to purchase more of the good."}]},{"id":"b1007c62-6e73-4e8e-8368-e503ce03f7e7","cardType":"basic","points":2,"front":"How does the substitution effect increase quantity demanded after a price fall?","back":"The good becomes cheaper relative to substitutes, so buyers switch towards it.","mcqOptions":[{"text":"The good becomes cheaper relative to substitutes, so buyers switch towards it.","correct":true,"explanation":"A price fall makes the good relatively more attractive than substitute goods. Consumers respond by switching expenditure towards it, increasing its quantity demanded."},{"text":"The good becomes more expensive relative to substitutes, so buyers switch away from it.","correct":false,"explanation":"A fall in the good's price makes it cheaper relative to substitutes, not more expensive. Buyers therefore tend to switch towards it rather than away."},{"text":"The good becomes cheaper relative to complements, so buyers switch towards it.","correct":false,"explanation":"The substitution effect compares the good with substitutes, which can replace it. Complements are consumed together and are not the relevant comparison for this effect."},{"text":"The good becomes equally priced relative to substitutes, so buyers switch towards it.","correct":false,"explanation":"A price fall changes the good's relative price, making it cheaper than substitutes. Equal relative prices would not provide this substitution incentive."}]},{"id":"f3bf5681-5db3-40fd-b30b-a4d6530be2de","cardType":"basic","points":2,"front":"Why does diminishing marginal utility contribute to a downward-sloping demand curve?","back":"Each extra unit gives less additional satisfaction, so buyers require a lower price to buy more.","mcqOptions":[{"text":"Each extra unit gives less additional satisfaction, so buyers require a lower price to buy more.","correct":true,"explanation":"Diminishing marginal utility means each additional unit contributes less satisfaction. Buyers will therefore only purchase extra units when the price falls sufficiently to match their lower marginal benefit."},{"text":"Each extra unit gives more additional satisfaction, so buyers require a higher price to buy more.","correct":false,"explanation":"This reverses diminishing marginal utility. Extra units provide less additional satisfaction, so buyers require a lower price before purchasing more."},{"text":"Each extra unit gives the same additional satisfaction, so buyers accept any price to buy more.","correct":false,"explanation":"Constant marginal utility would not explain why willingness to pay falls for successive units. Diminishing marginal utility means additional satisfaction decreases, requiring lower prices."},{"text":"Each extra unit gives less total satisfaction, so buyers require a lower price to buy more.","correct":false,"explanation":"Diminishing marginal utility concerns the additional satisfaction from each unit, not necessarily total satisfaction. The correct explanation refers to less additional satisfaction and lower required prices."}]},{"id":"e1ca74ed-4802-407a-b22c-dba15879e7b2","cardType":"basic","points":1,"front":"What does each point on a demand curve show?","back":"The quantity demanded at one particular price, with other conditions held constant.","mcqOptions":[{"text":"The quantity demanded at one particular price, with other conditions held constant.","correct":true,"explanation":"Each point pairs a specific price with the quantity demanded at that price. Non-price determinants are held constant so the point represents movement along one demand curve."},{"text":"The quantity supplied at one particular price, with other conditions held constant.","correct":false,"explanation":"This describes supply rather than demand. A point on a demand curve shows the quantity demanded at a particular price, with other conditions unchanged."},{"text":"The total demand at every possible price, with other conditions held constant.","correct":false,"explanation":"One point represents one price-quantity combination, not all prices simultaneously. The entire demand curve shows the relationship across prices."},{"text":"The change in demand after income changes, with other conditions held constant.","correct":false,"explanation":"An income change shifts the demand curve rather than defining one point on it. Each point instead shows quantity demanded at one particular price."}]},{"id":"9d1e621f-04b8-489c-b2f7-b852f72e3b85","cardType":"basic","points":1,"front":"What happens when the good's own price changes?","back":"There is a movement along the same demand curve and a change in quantity demanded.","mcqOptions":[{"text":"There is a movement along the same demand curve and a change in quantity demanded.","correct":true,"explanation":"A change in the good's own price changes quantity demanded while leaving the demand curve itself unchanged. The result is movement from one point to another on that curve."},{"text":"There is a shift of the demand curve and a change in demand.","correct":false,"explanation":"A shift is caused by a non-price condition such as income, tastes, or the price of a related good. An own-price change causes movement along the same curve."},{"text":"There is a movement along the same supply curve and a change in quantity supplied.","correct":false,"explanation":"This refers to supply, not demand. For demand, a change in the good's own price causes movement along the same demand curve and changes quantity demanded."},{"text":"There is no movement and demand remains unchanged.","correct":false,"explanation":"Quantity demanded responds to the good's own price. Although the demand curve does not shift, there is movement along it and quantity demanded changes."}]},{"id":"561c105f-ad20-4404-8209-dc024f26b50d","cardType":"basic","points":1,"front":"What happens when a condition of demand, such as income or tastes, changes?","back":"The whole demand curve shifts.","mcqOptions":[{"text":"The whole demand curve shifts.","correct":true,"explanation":"Changes in non-price determinants such as income or tastes alter demand at every price. This is represented by shifting the whole demand curve, rather than moving along it."},{"text":"There is a movement along the same demand curve.","correct":false,"explanation":"Movement along a demand curve results from a change in the good's own price. A change in income or tastes shifts the whole demand curve."},{"text":"The whole supply curve shifts.","correct":false,"explanation":"Changes in demand conditions affect the demand curve, not directly the supply curve. Income or tastes cause the whole demand curve to shift."},{"text":"The quantity demanded stays fixed at every price.","correct":false,"explanation":"A change in a condition of demand changes the quantity buyers want at given prices. This is shown by a shifted demand curve, not fixed quantity demanded."}]},{"id":"d9f8833e-1f88-4784-a368-d6432c2fc7fa","cardType":"basic","points":2,"front":"How is market demand obtained from individual demand curves?","back":"By horizontally summing the quantities demanded by all buyers at each price.","mcqOptions":[{"text":"By horizontally summing the quantities demanded by all buyers at each price.","correct":true,"explanation":"Market demand adds individual quantities demanded at each specified price. Adding quantities horizontally preserves the common price and produces the market demand curve."},{"text":"By vertically summing the prices paid by all buyers at each quantity.","correct":false,"explanation":"Vertical summation adds prices and is associated with combining some supply or willingness-to-pay relationships. Market demand adds buyers' quantities at each price horizontally."},{"text":"By averaging the quantities demanded by all buyers at each price.","correct":false,"explanation":"Market demand is a total, not an average. The quantities demanded by all individual buyers are horizontally summed at each price."},{"text":"By multiplying each buyer's quantity demanded by the market price.","correct":false,"explanation":"Multiplying quantity by price calculates expenditure, not market demand. Market demand is obtained by adding all individual quantities demanded at each price."}]},{"id":"0d1fae9a-1c86-4d44-9ff7-1e00e42b63c1","cardType":"basic","points":2,"front":"What does the expression $Q_{D}=\\sum q_{i}$ represent?","back":"Market quantity demanded equals the sum of each individual's quantity demanded.","mcqOptions":[{"text":"Market quantity demanded equals the sum of each individual's quantity demanded.","correct":true,"explanation":"The summation symbol adds the quantities demanded by individuals, represented by q_i. Therefore Q_D denotes total or market quantity demanded."},{"text":"Market quantity supplied equals the sum of each firm's quantity supplied.","correct":false,"explanation":"This describes market supply, which would use firms' supplied quantities rather than individual demand quantities. Q_D specifically denotes market quantity demanded."},{"text":"Individual quantity demanded equals the average of market demand.","correct":false,"explanation":"The equation uses a sum, not an average, and Q_D represents the market total. It adds every individual's quantity demanded."},{"text":"Market price equals the sum of each individual's quantity demanded.","correct":false,"explanation":"The left side Q_D represents quantity demanded, not price. The equation totals individual quantities demanded to find market quantity demanded."}]},{"id":"d75c27e1-d585-415b-acf3-070edee0aee3","cardType":"cloze","points":null,"front":"The standard demand curve slopes [ ] because price and quantity demanded have an inverse relationship.","back":"The standard demand curve slopes downward from left to right because price and quantity demanded have an inverse relationship.","mcqOptions":[{"text":"downward from left to right","correct":true,"explanation":"The demand curve slopes downward from left to right because buyers generally demand less at higher prices and more at lower prices, creating an inverse price-quantity relationship."},{"text":"upward from left to right","correct":false,"explanation":"An upward slope would show a direct relationship, where quantity demanded rises as price rises. The standard demand curve slopes downward because price and quantity demanded are inversely related."},{"text":"horizontally from left to right","correct":false,"explanation":"A horizontal curve would imply the same price at different quantities, which does not describe the standard demand relationship. Demand slopes downward as price falls and quantity demanded rises."},{"text":"vertically from left to right","correct":false,"explanation":"A vertical curve would imply a fixed quantity regardless of price. The standard demand curve slopes downward because quantity demanded changes inversely with price."}]},{"id":"dd964a82-ae82-449c-ae51-c4edb205e511","cardType":"cloze","points":null,"front":"A change in the good's own price causes a movement [ ], rather than a shift.","back":"A change in the good's own price causes a movement along the demand curve, rather than a shift.","mcqOptions":[{"text":"along the demand curve","correct":true,"explanation":"Only the good's own price changes, so the demand relationship and curve remain unchanged. The resulting change in quantity demanded is shown by movement along that curve."},{"text":"away from the demand curve","correct":false,"explanation":"A price change does not move the point away from the demand curve. It creates movement from one point to another along the same curve."},{"text":"across the supply curve","correct":false,"explanation":"The supply curve describes producers' responses, not buyers' demand. A change in the good's own price causes movement along the demand curve."},{"text":"through a shift in the demand curve","correct":false,"explanation":"A shift requires a change in a condition of demand, such as income or tastes. The good's own price instead causes movement along the existing demand curve."}]},{"id":"4ab91b78-73bb-4d83-9347-b085a1f7a465","cardType":"cloze","points":null,"front":"A Veblen good can have higher quantity demanded at a higher price because the price strengthens its role as a [ ].","back":"A Veblen good can have higher quantity demanded at a higher price because the price strengthens its role as a status symbol.","mcqOptions":[{"text":"status symbol","correct":true,"explanation":"The higher price increases the good’s ability to signal wealth and social position. This prestige effect can outweigh the usual substitution effect, causing quantity demanded to rise."},{"text":"necessity","correct":false,"explanation":"A necessity is typically bought because it is essential, not because a higher price improves its appeal. The correct term is status symbol, which explains the prestige effect."},{"text":"substitute","correct":false,"explanation":"A substitute is an alternative product that can replace another, and a higher price does not strengthen that role. The correct term is status symbol, linked to signalling wealth."},{"text":"source of income","correct":false,"explanation":"A source of income generates earnings rather than social prestige, so a higher price would not normally increase demand for that reason. The correct term is status symbol."}]},{"id":"bd894b5d-2ddc-4d7b-98d4-dd3e1ddd088d","cardType":"cloze","points":null,"front":"For a Giffen good, a price rise can reduce real income so severely that the household buys more of the cheap [ ].","back":"For a Giffen good, a price rise can reduce real income so severely that the household buys more of the cheap staple.","mcqOptions":[{"text":"staple","correct":true,"explanation":"A staple is a basic, inexpensive food that takes up much of a poor household’s budget. When real income falls, the household may buy more of it despite the price rise."},{"text":"luxury","correct":false,"explanation":"Luxury goods are usually reduced when real income falls, so they cannot explain the unusual Giffen response. The correct term is staple, the basic food bought in greater quantity."},{"text":"substitute","correct":false,"explanation":"A substitute is another product used instead of the good, not the low-cost basic food whose consumption rises after real income falls. The correct term is staple."},{"text":"durable","correct":false,"explanation":"A durable good provides services over a long period and is not the relevant budget food in this explanation. The correct term is staple, which is bought for basic consumption."}]},{"id":"7bacc867-c574-4e58-b8f9-a108e993c2e5","cardType":"basic","points":2,"front":"How can a Veblen good break the law of demand?","back":"A higher price can increase its status appeal, encouraging buyers to purchase more to signal wealth.","mcqOptions":[{"text":"A higher price can increase its status appeal, encouraging buyers to purchase more to signal wealth.","correct":true,"explanation":"The higher price makes the product appear more prestigious and strengthens its use as a signal of wealth. This status effect can outweigh the normal substitution effect."},{"text":"A higher price can reduce its status appeal, encouraging buyers to purchase more to signal wealth.","correct":false,"explanation":"Reducing status appeal would normally make buyers less interested, not encourage additional purchases. Veblen demand rises because the higher price strengthens the product’s status appeal."},{"text":"A lower price can increase its status appeal, encouraging buyers to purchase more to signal wealth.","correct":false,"explanation":"This reverses the defining Veblen relationship: a lower price weakens exclusivity and prestige. The correct explanation is that a higher price increases status appeal and signals wealth."},{"text":"A higher price can increase its status appeal, encouraging buyers to purchase less to signal wealth.","correct":false,"explanation":"The price may increase prestige, but this option reverses the resulting quantity response. In a Veblen case, buyers purchase more because the higher price improves the status signal."}]},{"id":"51864ac3-34d2-46e0-82d7-2b1e79c37eee","cardType":"basic","points":2,"front":"How can a Giffen good break the law of demand?","back":"A price rise can cut a low-income household's real income so severely that it buys more of the staple and less expensive food.","mcqOptions":[{"text":"A price rise can cut a low-income household's real income so severely that it buys more of the staple and less expensive food.","correct":true,"explanation":"For a Giffen good, the negative income effect from a price rise is exceptionally strong. The household becomes effectively poorer, buys more of the staple, and reduces costlier foods."},{"text":"A price rise can increase a low-income household's real income so severely that it buys more of the staple and less expensive food.","correct":false,"explanation":"A price rise reduces purchasing power, so it cuts real income rather than increasing it. The correct explanation uses the strong fall in real income to explain greater staple consumption."},{"text":"A price fall can cut a low-income household's real income so severely that it buys more of the staple and less expensive food.","correct":false,"explanation":"A price fall normally raises purchasing power and therefore real income. The Giffen effect begins with a price rise that cuts real income and leads to more staple consumption."},{"text":"A price rise can cut a low-income household's real income so severely that it buys less of the staple and more expensive food.","correct":false,"explanation":"This gives the ordinary income response rather than the Giffen response. The unusually strong fall in real income makes the household buy more of the staple and less expensive food."}]}]}],"examCountdown":null,"heading":"2.1.1 effective demand","title":"2.1.1 effective demand Flashcards","topbar":{"backHref":"/international-a-level/economics/cie/flashcards"},"topicSidebar":"$L39"}]}],"topicId":"7a933e63-c770-41a9-a523-9fa7db081990","walled":"$L3a"}],"$L3b","$L3c"]