Question

In each of the following examples, name the factor that affects demand and describe its impact on your demand for a new cell phone. a. You hear a rumor that a new and improved model of the phone you want is coming out next year. income price of a related good expectations consumer preferences Your demand will . b. Your grandparents give you $500. expectations income price of a related good consumer preferences Your demand will . c. A cellular network announces a holiday sale on a data package that includes the purchase of a new smartphone. expectations consumer preferences price of a related good income Your demand will . d. A friend tells you how great his new phone is and suggests that you get one, too. income price of a related good consumer preferences expectations Your demand will .

Answer 1

First of all let's understand what is demand

Demand is the total value of goods and services demanded in an economy during a specific time period at a given price level. It is also referred as the demand for the gross domestic product of a country.

a.

Future expectations:

Since the consumers are expecting the new model in the next year, they would prefer to buy the new model. Thus, present demand for mobile phone would decrease.

b.

Increasing disposable income:

The gift of $500 would increase the disposable income by $500. Since the person’s income increases, they would demand more. Thus, it leads to increase the demand for mobile phone.

c.

Related goods:

Text messaging is complementary goods with the mobile. Since the price of a text message is service price decreases, it leads to increase the demand for mobile.

d.

Preferences:

The friend increases the preferences of buying mobile by describing the positive aspects of new mobile. This increases the person’s interest and he would buy the mobile. Thus, strong preference leads to increase the demand for mobile.