Economics Chapter 4

rule stating that more will be demanded at lower prices and less at higher prices ________

Law of Demand

To determine elasticity, which question would an economist ask?

What portion of the consumer's income is required for the purchase?

Demand

Willingness and Ability

On a demand curve, movement along the curve, as opposed to a shift in the entire curve, is a result of _________

a change in price

What is the income effect?

a change in quantity demanded caused by a change in consumer income

For which product is demand likely to be the most elastic?

a product with many adequate substitutes

Which product most likely has a demand that is inelastic?

a vital medicine

When the price of something increases, the quantity demanded _______

decreases

combination of desire, ability, and willingness to buy a product ________

demand

portion of a change in quantity demanded caused by a change in a consumer's income when the price of a product changes ________

income effect

When businesses raise prices on products with inelastic demand, total revenues are more likely to _____ than when prices are increased on product with elastic demand.

increase

Change in price and change in revenue move in the same direction.

inelastic

type of elasticity in which the percentage change in the independent variable (usually price) causes a less than proportionate change in the dependent variable (usually quantity demanded or supplied)

inelastic

The market demand curve that shows the ____________________ by everyone who is interested in purchasing a product at all possible prices.

qualities demand

Which would an economist consider a likely substitute for coffee?

tea

Utility

usefulness

What is the relationship between income and demand?

An increase in income increases demand.

What is the main cause of a change in quantity demanded?

Change in price

diminishing marginal utility

Decreasing satisfaction or usefulness as additional units of a product are acquired

Law of Demand

Its a rule, when prices go up demand goes down, when prices go down demand goes up

As people use more and more of a product, they encounter ____________________.c

Diminishing Marginal Utility

Demand is elastic when a given change in price causes a relatively smaller change in quantity demanded.

False

The sole determinate of elasticity is the answer to this question: Can the purchase be delayed?

False

To estimate elasticity, add the direction of a price change to the direction of the change in total revenue, or total expenditures.

False

Prices act as a motivating influence, or ____________________ , that causes an individual to take action.

Incentive

The Law of Demand states that the quantity demanded of a product varies ____________________ with its price.

Inversely

A demand schedule is best described as _______

data

Demand elasticity is the extent to which a change in price causes a change in the quantity demanded.

True

Demand is unit elastic when a given change in price causes a proportional change in quantity demanded.

True

When price increases demand decreases. When price decreases demand increases.

True

Demand is the desire, ____________________, and willingness to buy a product or service.

ability

Consider the term marginal utility. Which word is the best synonym for marginal?

additional

Marginal

additional

Which is a likely complement to a tablet computer?

apps

Why is the Law of Demand called a "law"?

because it has been demonstrated repeatedly

Prices for common vegetables tend to be elastic. Why?

because other vegetables are available

Why is a demand curve downward sloping?

because quantity demanded increases as price decreases

consumer demand for different amounts at every price, causing the demand curve to shift to the left or the right ________

change in demand

different amounts demanded at every price, causing the demand curve to shift to the left or the right ________

change in demand

movement along the demand curve showing that a different quantity is purchased in response to a change in price ________

change in quantity demanded

products related in such a way that an increase in the price of one reduces the demand for the other

complements

products related in such a way that an increase in the price of one reduces the demand for the other ________

complements

graph showing the quantity demanded at each and every possible price that might prevail in the market at a given time ________

demand curve

the extent to which a change in price causes a change in the quantity demanded _______

demand elasticity

An economist performs a total expenditures test and finds that a change in price and a change in revenue move in opposite directions and concludes that the test shows ________

demand is elastic

A hungry man is willing to pay a high price for food. After he is no longer hungry, he is not willing to pay the same high price. Which of the following best defines this example?

diminishing marginal utility

To estimate elasticity, compare the _________ of a price change to the _________ of the change in total revenue.

direction, direction

Which would an economist consider a likely complement for coffee?

donut

Change in price and change in revenue move in opposite directions.

elastic

Demand is _____ when the price change results in a relatively larger change in quantity demanded. People ____ ____ need products urgently with this type of demand.

elastic, do not

When a purchase requires more of a person's income, it tends to be e______ . However, if the costly purchase is for a product or service a person needs urgently, the demand becomes more ________ .

elastic, inelastic

Generally, the more available substitutions are, the more ______ demand is. The _____ of the market can affect demand elasticity in cases of substitutions.

elastic, size

Which type of elasticity is the case of demand elasticity where the percentage change in the independent variable (usually price) causes a less than proportionate change in the dependent variable (usually quantity demanded or supplied)

inelastic demand

Demand is ______ when the price change results in a relatively smaller change in quantity demanded. People ___ need products urgently with this type of demand.

inelastic, do

If you cannot put off purchase of a product, demand is ______ . If you can wait, demand is _______ .

inelastic, elastic

Changes in quantity demanded and changes in price have a(n) _________ relationship.

inverse

satisfaction or usefulness obtained from acquiring one more unit of a product ________

marginal utility

incentive

motivates you

A change in quantity demanded is represented by ______

movement along the demand curve.

Inverse

opposite

To measure the elasticity of demand, compare the percentage change in quantity demanded to the percentage change in

price

Total expenditures (or total revenue) is found by multiplying the _____ of a product by the _____ ________ for any point along the demand curve.

price, quantity demand

products related in such a way that an increase in the price of one increases the demand for the other ________

substitutes

the portion of a change in quantity demanded caused by a change in price that makes other products more or less costly ________

substitution effect

What are the characteristics of demand?

the desire, ability, and willingness to buy a product

Which of the following replaces a costly item with a less costly one?

the substitution effect

What test do economists use to measure elasticity?

total expenditures

Price change has no effect on revenue.

unit elastic

Which term refers to a changing price that causes a proportional change in total revenue?

unit elastic

Demand is ______ ________ when the price change results in a proportional change in quantity demanded. This type of demand is ______ to find.

unit elastic, difficult