ECON - Mod 5

movement along the demand curve

s a change in the quantity demanded of a good that is the result of a change in that good's price.

law of demand

says that a higher price for a good or service, all other things being equal, leads people to demand a smaller quantity of that good or service.

Which of the following will increase the demand for disposable diapers? a. a new "baby boom" b. concern over the environmental effect of landfills c. a decrease in the price of cloth diapers d. a move toward earlier potty training of children e. a decrease in the price of disposable diapers

A

A decrease in the price of butter would most likely decrease the demand for a. margarine. b. bagels. c. jelly. d. milk. e. syrup.

A) A decrease in the price of butter would most likely decrease the demand for margarine because they are substitutes

Explain whether each of the following events represents (i) a change in demand (a shift of the demand curve) or (ii) a movement along the demand curve (a change in the quantity demanded). a. A store owner finds that customers are willing to pay more for umbrellas on rainy days. b. When XYZ Telecom, a long-distance telephone service provider, offered reduced rates on weekends, its volume of weekend calling increased sharply. c. People buy more long-stem roses the week of Valentine's Day, even though the prices are higher than at other times during the year. d. A sharp rise in the price of gasoline leads many commuters to join carpools in order to reduce their gasoline purchases.

A) In this case demand curve shifts rightward because people want to buy more umbrellas at any given price on rainy days B) In this case we have movement along the demand curve because when price falls quantity of demand rises C) In this case demand curve shifts rightward because demand on roses increase during valentine's day D) In this case we have movement along the demand curve because when gasoline price rises demand falls

If an increase in income leads to a decrease in demand, the good is a. a complement. b. a substitute. c. inferior. d. abnormal. e. normal

C

Which of the following will occur if consumers expect the price of a good to fall in the coming months? a. The quantity demanded will rise today. b. The quantity demanded will remain the same today. c. Demand will increase today. d. Demand will decrease today. e. No change will occur today.

D

Which of the following would increase demand for a normal good? A decrease in a. price b. income c. the price of a substitute d. consumer taste for a good e. the price of a complement

E) Price falling of a complement will rise demand on a normal product

complements

if a rise in the price of one of the goods leads to a decrease in the demand for the other good.

individual demand curve

illustrates the relationship between quantity demanded and price for an individual consumer.

substitutes

a rise in the price of one of the goods leads to an increase in the demand for the other good.

change in demand

a shift of the demand curve, which changes the quantity demanded at any given price.

supply and demand model

a model of how a competitive market works.

inferior good

When a rise in income decreases the demand for a good,

normal good

When a rise in income increases the demand for a good—the normal case

demand curve

a graphical representation of the demand schedule. It shows the relationship between quantity demanded and price.

competitive market

a market in which there are many buyers and sellers of the same good or service, none of whom can influence the price at which the good or service is sold.

Create a table with two hypothetical prices for a good and two corresponding quantities demanded. Choose the prices and quantities so that they illustrate the law of demand. Using your data, draw a correctly labeled graph showing the demand curve for the good. Using the same graph, illustrate an increase in demand for the good

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Draw a correctly labeled graph showing the demand for apples. On your graph, illustrate what happens to the demand for apples if a new report from the Surgeon General finds that an apple a day really does keep the doctor away.

see pic

demand schedule

shows how much of a good or service consumers will be willing and able to buy at different prices.

quantity demanded

the actual amount of a good or service consumers are willing and able to buy at some specific price.