Demand

The price of a _______ of a good is one of the non-price determinants of its demand.

Complement

A decrease in the price of good A will cause in increase in the demand for good B when two goods are _______

Complements

When considering how changes in taste and preferences or demographics affect demand, we tend to evaulate: a. supply side of the market b. changes in quantity demanded c. individual market d. entire market

D. Entire market

For ________ goods, an increase in income increases demand and a decrease in income decreases demand.

Normal

One reason the demand curve slopes down is?

The income effect. When prices fall, purchasing power of your income increases, allowing you to purchase more goods and services.

Which of the following best explains why people eventually stop eating when they dine at an "All you can Eat" buffet? a. diminishing marginal utility b. substitution effect c. income effect d. increasing marginal cost

a. diminishing marginal utility

Factors affecting how much a particular product consumers are willing and able to buy.

1. Income 2. Future price expectations 3. Tastes and preferences

Financing options for small businesses:

1. loans 2. future customers 3. angel investors 4. economic development organizations

Shift in demand

A change in quantity of a good, service, or resource demanded at every price. Graphically, an increase in demand is represented by a rightward shift of the demand curve, while a decrease in demand is represented by a leftward shift of demand curve.

Movement along a demand curve

A change in the quantity of a good, service, or resource demanded due to a change in its price. Graphically, this change is represented as a movement along an existing demand curve.

Financial Institution

A firm that provides financial services, such as accepting deposits and providing loans to customers.

Inferior good

A good for which there's an inverse relationship between the demand for the good and income. For inferior goods, an increase in income decreases demand, and a decrease in income increases demand; a good with a negative income elasticity of demand.

Expectations

Anticipation by individuals and firms of costs and benefits that lie in the future.

Resource

Any item, whether a gift of nature, result of production or result of human effort, that's used to produce goods and services

Market

Any place where, or mechanism by which, buyers and sellers interact to trade goods, services, or resources. Formal markets - NY Stock exchange and local retail store. Informal markets - swap meets or garage sales, less structured with fewer rules.

If consumers are more willing and able to buy an item because a nonprice determinant has changed, what happens to the quantity demand?

At every price the quantity demanded increases. Graphically, increase in demand is represented by demand curve shifting to the right.

If consumers are less willing and able to buy the good, service, or resource, what happens to the quantity demanded?

Decreases at every price. Graphically, a decrease in demand is represented by demand curve shifting to the left.

Tastes and preferences, the number of buyers, and buyer expectations are all nonprice determinants of _________

Demand

When income changes, _______ can either increase or decrease.

Demand

Without individuals and households that are willing and able to buy a good, the ______ side of the market can't exist

Demand

income effect

Effect that a change in the price of a good, service, or resource has on purchasing power of income. For example, when prices decrease, purchasing power of income increases and consumers are able to purchase more goods, services or resources. Causes demand curve to slope downward because a change in a good's price changes how much of the good a person's income can buy. Higher prices reduce purchasing power of income. Lower prices increase purchasing power. Person's income doesn't change, how much it can buy does. Refers to effect that a change in price of a good or service has on purchasing power of a consumer's income.

Substitution effect

Effect that a change in the price of one good, service, or resource has on demand for another. For example, increase in the price of one good will increase the demand for its substitutes and vice versa. Ex: When a plane ticket to fly to your grandma's house costs $200, you take a plane. When the same ticket costs $350, you drive. Your favorite cereal is on sale for $2 a box, you buy one. When it's selling at its regular price, you buy the generic store brand instead.

Normal goods

Good for which there's a direct relationship between the demand for the good and income. For normal goods, an increase in income increases demand, and a decrease in income decreases demand; a good with a positive income elasticity of demand.

Complements

Goods, services, or resources that are used or consumed with one another. Ex. chips and salsa

Substitutes

Goods, services, or resources that are viewed as replacements for one another

Demand curve

Graphical representation of relationship between price of a good, service, or resource and quantities consumers are willing and able to buy over a fixed time period, all else held constant. Always place price on vertical axis (y) and quantity on horizontal axis (x). Illustrates relationship between opportunity cost, or price, of an action and quantity of an action people will undertake.

Market demand

Important to consider not just the demand of a single buyer but the overall demand of everyone who is willing and able to buy the product. Overall demand. Overall, or total, demand for a good, service or resource. It represents the horizontal summation of the quantities demanded by individuals, firms, states, or even nations at each price over a fixed time period, all else held constant.

Consumers' willingness and ability to buy a good, service, or resource will change if ______ changes, resulting in a new relationship between price and quantity demanded.

Income

What are the three main reasons why demand curves are downward-sloping?

Income effect, substitution effect, and diminishing marginal utility.

What is the most important determinant of demand?

Income, ability to pay.

Service

Intangible product or action consumers, firms, or governments wish to purchase

Buyers

Market participants who seek to obtain goods, services, and resources

Diminishing marginal utility

Negative relationship between quantity of a good, service or resource and the marginal utility obtained from each additional unit consumed in a given period of time. Ex. when econ department serves all-you-can-eat ice cream at its annual spring student-recruiting event, you eat three ice cream cones. You really enjoy the first, second is just okay, and third is tasteless.

Tastes and preferences

Perception of the desirability associated with consuming a good, service, or resource.

In a world characterized by scarcity, _______ mechanism for allocating goods, services, and resources between competing uses is the most reliant.

Prices

Law of demand

Principle in economics stating that as price of a good, service, or resource rises, quantity demanded will decrease, and vice versa, all else held constant. Lower prices lead to a higher quantity demanded; demand curve always slops down. Negative relationship between price of an item and quantity demanded. Price of good rises, quantity demanded falls.

Quantity demanded

Quantity of a good, service, or resource that consumers are willing and able to buy at a given price

An increase in the price of a good's __________ will shift the demand for the good to the right.

Substitute

Demand schedule

Tabular representation of the relationship between price of a good, service or resource and quantities consumers are willing and able to buy over a fixed time period, all else held constant

Good

Tangible product that consumers, firms, or governments wish to purchase

What are the nonprice determinants of demand?

Tastes and preferences Number of buyers Expectations about prices in the future Income Prices of substitutes and complements

Difference between changes in demand and changes in quantity demanded?

When a nonprice determinant of demand changes, demand curve shifts, and there's an increase or decrease in demand. When the price of a good changes, we move along the demand curve to a new point on the curve, and there's an increase or decrease in quantity demanded.

The size of the shift in the demand curve depends on...

Which nonprice determinant changes and how much the nonprice determinant changes. Examples: 1. Some nonprice determinants have relatively larger effects on quantity demanded than others. The demand curve for a good with lots of substitutes will not shift very much when the price of one of the substitutes changes. 2. A smaller change in nonprice determinant will generate a smaller shift in the demand curve than does a larger change, all else equal. A 10% increase in income will cause a smaller increase in demand for a normal good than a 20% increase in income.

Demand

Willingness and ability to pay for something at a given time at a given price. Affects both buyers and sellers, whether they're buying or selling goods or services. Plays a key role in determining what goods and services people and businesses buy and the price at which they buy them.

Identify which of the following scenarios is likely to shift the demand for wheat bread to the right? a. population of Arizona grows by 20% b. drought in Kansas makes people believe that the price of wheat bread will increase in a couple of months c. people learn that certain bread additives may be bad for their health d. as people become more health conscious, they discover the benefits of whole wheat as part of their diet

a, b, d

The demand curve for a normal good is downward sloping because: a. benefit of consuming more of a good falls with each additional unit, so the price consumers are willing and able to pay also falls with increased consumption b. as prices rise, purchasing power of each dollar earned falls, and consumers are willing and able to buy more of a good c. as consumers purchase substitutes, quantity demanded of the good rises d. benefit of consuming more of a good rises with each additional unit, so price consumers are willing and able to pay also falls with increased consumption d. as consumers purchase substitutes, quantity demanded for good falls e. as prices rise, purchasing power of each dollar earned falls, and consumers are willing and able to buy less of a good

a. benefit of consuming more of a good falls with each additional unit, so price consumers are willing and able to pay also falls with increased consumption. e. as consumers purchase substitutes, quantity demanded of the good falls. f. as prices rise, purchasing power of each dollar earned falls, and consumers are willing and able to buy less of a good.

Which of the following will shift the demand curve for hamburgers? a. change in the price of submarine sandwiches, a substitute b. change in the price of hamburgers c. change in the price of ground beef d. change in the price of french fries, a complement

a. change in the price of submarine sandwiches d. change in the price of french fries, a complement

For inferior goods, a. decrease in income increases demand b. increase in income decreases demand c. increase in income increases demand d. decrease in income decreases demand

a. decrease in income increases demand b. increase in income decreases demand

A demand curve can be drawn as: a. downward-sloping curve b. horizontal line c. an inverted U-shape curve d. downward-sloping line

a. downward-sloping curve b. horizontal line d. downward-sloping line

As a result of a decrease in the price of gasoline, consumers can afford to buy more gasoline for more driving tips. This is an illustration of: a. income effect b. substitution effect c. diminishing marginal utility d. consumer sovereignty

a. income effect

On average, about 3,500 new mobile homes are sold every month at an average price of $40,000. In 2013 average income in the United States rose and, all else equal, mobile home sales decreased. From the information given, it is reasonable to conclude that mobile homes: a. inferior goods b. normal goods c. aren't scarce d. have an upward-sloping demand curve

a. inferior goods

Which of the following are non-price determinants of demand? a. prices of complementary goods b. number of sellers of a good or service c. prices of substitute goods d. prices of inputs

a. prices of complimentary goods c. prices of substitute goods

Which of the following is something markets can't do? a. provide unlimited goods and services b. determine the equilibrium quantity of a good or service c. determine the equilibrium price of a good or service d. make buyers and sellers better off

a. provide unlimited goods and services

In economics, a market describes: a. system that allows interactions of buyers and sellers of foods b. place where buyers and sellers transact. c. type of location where sellers offer goods and buyers purchase them d. system that allows interactions of buyers and sellers of goods and not services

a. system that allows interactions of buyers and sellers of goods. b. a place where buyers and sellers interact c. type of location where sellers offer goods and buyers purchase them

What happens when the prices of complements or substitutes for a product change? a. supply of that product will change b. demand for that product will change c. quantity of that product supplied will change d. quantity of that product demanded will change

b. demand for that product will change.

When a non-price determinant of demand changes, a change in: a. quantity demanded occurs, which causes a movement along the demand curve. b. demand occurs, which has the effect of shifting the entire demand curve to the right or left c. quantity supplied occurs, which causes a movement along demand curve d. prices occurs, which has effect of moving along the demand curve

b. demand occurs, which has the effect of shifting the entire demand curve to the right or left.

Competition between suppliers tends to drive prices ______; competition between buyers tends to drive prices ______. a. up; down b. down; up c. down; down d. up; up

b. down; up

Which of the following can both increase and decrease demand depending on type of good? a. increase in taxes b. increase in consumer income c. decrease in the prices of inputs d. increase in the number of consumers

b. increase in consumer income

Which of the following scenarios is an example of a person interacting outside of a market? a. Mark places his comic book collection up for sale on eBay. b. Young buys fresh radishes at the local farmers market c. Melissa votes for her favorite performer at a local talent show d. Isabella agrees to fix Miguel's sink if Miguel paints Isabella's porch

c. Melissa votes for her favorite performer at a local talent show.

If a good is normal, then: a. income and demand for the good are negatively related b. good is considered to be preferable to other goods c. income and demand for the good are positively related d. good is considered to be of lower quality than other goods

c. income and demand for the good are positively related.

In a perfectly competitive market: a. individuals can directly influence the price b. price changes so frequently that no one can influence it c. individuals don't directly influence the prices, but collectively all individuals have an effect on price d. price is set by sellers

c. individuals don't directly influence the prices, but collectively all individuals have an effect on price.

A market price: a. is a price dictated by a government agency before trading can begin b. is any price at which sellers desire to sell their good or service c. is a price at which buyers and sellers agree to exchange money for a good or service d. is any price at which buyers desire to purchase a good or service

c. is a price at which buyers and sellers agree to exchange money for a good or service

Which of the following are non-price determinants of demand? a. number of sellers of a good or service b. prices of inputs c. prices of substitute goods d. prices of complimentary goods

c. prices of substitute goods d. prices of complementary goods

When we talk about the demand for a product, we are referring to: a. amount buyers and sellers both want to exchange b. quantity that consumers are willing and able to buy at the current price, all else held constant c. quantity that consumers are willing and able to buy at a variety of different prices, all else held constant. d. price that consumers are willing and able to pay, all else held constant

c. quantity that consumers are willing and able to buy at a variety of different prices, all else held constant

How much a non-price determinant changes (and which one changes) will ultimately determine: a. direction of the shift in the demand curve b. size of the movement along the demand curve c. the size of the shift in the demand curve d.difference between a change in demand and a change in quantity demanded

c. size of shift in the demand curve.

Pam sees that the price of bananas has risen in the grocery store. All else equal, she decides to buy more tangerines than she normally purchases. From the info given, you can conclude: a. bananas are a luxury good b. tangerines and bananas are complements c. tangerines and bananas are substitutes d. tangerines are an inferior good

c. tangerines and bananas are substitutes

Which would be a likely cause of an increase in the demand for pizza? a. reduced desire for take-out and fast-food dining b. decrease in the price of pizza c. increase in the price of pizza d. health report showing eating pizza reduces stress

d. a health report showing eating pizza reduces stress

The demand curve for a good displays: a. demand for a good that's unmet by the suppliers b. information that's different from that found in the demand schedule for the good c. demand for a good that's met by the suppliers d. all of the information found in the demand schedule for the good

d. all of the information found in the demand schedule for the good

The change in the quantity of a good, service, or resource that consumers, firms, and governments are willing and able to buy due to a change in its price is called: a. price effect b. change in demand c. market effect d. change in the quantity demanded

d. change in the quantity demanded

Marcus budgets $120 a week for groceries. When the price of all food goes up by 10% he buys less salmon. This can best be explained by: a. substitution effect b. diminishing marginal utility c. change in income d. income effect

d. income effect

Other things held constant, the demand curve will shift when: a. supply changes b. the price of the good changes c. prices of inputs used in production increase d. non-price determinants of demand change

d. non-price determinants of demand change

The "all else held constant" assumption: a. makes it possible to study how a change in only the price affects the quantity demand. b. is rarely useful c. is a good representation of reality d. acknowledges that prices rarely change

makes it possible to study how a change in only the price affects the quantity demanded

The demand curve shifts when?

something other than the price of a good changes