Question

Q1.Explain two reasons why the demands foreign holidays might increase?

Answer 1

Answer 1:

Foreign holidays might increase because there is a direct positive relationship between income and holidays.

Explanation:

That is, people are more likely to go on a holiday if their income increases and refrain from doing so if their income takes a nosedive.

This essentially is due to the nature of the demand for foreign holidays.

Answer 2:

According to the laws of Economics, the following factors have the potential to shift the demand for goods and or services. They are:

• Changes in Prices of Substitutes and or complementary goods

• Consumer Tastes and Preferences  

Explanation:

1. Substitute goods are goods that can be used to replace the preferred option. Complementary goods are goods that should go with the primary product or good being demanded.

An example of substitute goods is pencil vs pen.

An example of complementary goods is pencil vs eraser.

In either case, when the price of one changes, in the case of substitutes, the demand for the alternative may take a sudden leap (all things being equal). On the other hand, the price of complementary products usually goes in the same direction so also their demand. If the prices of pencils go up, their demand will fall and so will the demand for erasers.

2. Tastes and preference are very strong influences on demand.

Phones, once upon a time used to have only one camera. Then the taste shifted to having two cameras (one in the front and another at the back). The current rave is for phones that have multiple cameras with various functionalities.

The implication is this. No matter how low the prices for single-camera phones go, the demand for them may never rise because preferences have moved on.

Cheers!