Asynchronous Assignment

1. Explain the determinants of quantity demanded?

2. Popeye’s income declines and, as a result, he buys more spinach. Is spinach an inferior or a
normal good? What happens to Popeye’s demand curve for spinach?

Answers:

1. The quantity demanded depends on various determinants:

 Price of the commodity: This is the most important determinant that affects the
demand of the commodity. It has an inverse relationship with the demand as price
increase price decreases and vice versa.

 Price of Substitute goods: The price of a substitute good affects the demand of the
commodity for example, when the price of coffee increases the demand for tea
increases and vice versa. Thus showing a direct relation between the commodity
and its substitute.

 Price of Complementary goods: In a similar fashion to Substitute goods , the price

for complementary good also affect the demand of the commodity for example,
when the price for petrol increases the demand for petrol cars decrease. Thus
showing an inverse relation between the commodity and its complement.

 Income of the consumer: Another important determinant just after price of

commodity is income of the consumer. It is directly related to the demand of
commodity as it determines the affordability of the person demanding the
commodity.

 Taste and Preferences: It has a direct influence on the demand of the commodity as
it depends on the changing fashion and tastes of consumer if the product is
preferred by the consumer, the demand keeps increasing and if not the demand
falls.

2. If Popeye is buying more of spinach at a decrease in income , it tells us that spinach is an

inferior good. The Popeye’s demand curve for spinach will increase and grow and an
uncertain rate as he suddenly starts buying more of spinach than he usually did, resulting in
a growth in his demand for spinach.