Chapter 3: Demand
False
True/False: The law of demand states that an increase in a good's price causes an increase in the amount demanded.
Purchasing Power
the amount of money, or income, that people have available to spend on goods and services.
Demand Curve
A graphic representation of a demand schedule, showing the relationship between the price of an item and the quantity demanded during a given period, with all other things being equal; Way to show the relationship between the price of a product and the quantity demanded.
Demand Schedule
A table that shows the level of demand for a particular item at various prices; A table showing how much of a good or service consumers will want to buy at different prices.
People will buy more of the lower-priced item
According to the substitution effect, if two items satisfy the same need and the price of one rise:
Consumer Tastes and Preferences (Popularity)
An increase in popularity causes an increase in demand - Example: Bengals = Oct. 7, 2015 - Oct. 15 2015 (major increase)
A
As income rises, demand for goods: A. Decreases B. Increases C. Remain Stable D. Fluctuates
Diminishing Marginal Utility
As more units of a product are consumed, the satisfaction received from each client, the units decline; States that each additional purchase of a product or service by a given consumer will be less satisfying than the previous purchase.
A
Changes in any of the determinants of demand: A. Result in an increase in the amount of goods available in the market B. Raise the rate of unemployment C. Produce an entirely new demand curve for a market D. Decrease the demand for a product
Demand Increases
Demand Increase/Decrease: A market size increases
Inelastic
Elastic/Inelastic: Gasoline
Elastic
Elastic/Inelastic: If the product is not a necessity.
Elastic
Elastic/Inelastic: Many substitutes are available.
Elastic
Elastic/Inelastic: Pizza
Inelastic
Elastic/Inelastic: Salt
Inelastic
Elastic/Inelastic: Substitutes are not available.
Complementary Goods
Goods that are commonly used with other goods An increase in the price of __________ __________ causes a decrease in demand; A decrease in the price of __________ __________ causes an increase in demand. - Example: Hotdog ==> Ketchup/Mustard/Napkins
Market Size
How many/the number of people who/that live in a market; An increase in __________ __________ causes an increase in demand - Example: Catholic School Enrollment on Westside of Cincinnati, Ohio = 1960 - 2015
Law of Demand - Inverse Demand
Increase in price, decrease in demand and vice verse.
Demand
Lower the price of an item, the higher the demand for the item (lower price of something, the more people will want and buy that item).
Determinants of Demand
Non-price factors that influence the amount of demand for a good or service.
Demand
The amount of a good or service that consumers are willing and able to buy at various possible prices during a given period of time.
True
True/False: The law of demand is explained by the income effect, the substitution effect, and diminishing marginal utility.
Indicates a decrease in demand
When a demand curve shifts to the left, what does that indicate?
Law of diminishing marginal utility
Which economic rule states that an additional satisfaction people get from consuming one more unit of a product will lessen with each additional unit they consume?
As the price goes up, quantity demanded goes up
Which statement reflects the inverse relationship between quantity demanded and price?
Substitution Effect
Consumer's tendency to substitute a lower-priced good for a similar, higher-priced one; The higher the price, the more people use substitutes.
Demand Increases
Demand Increase/Decrease: Bengal Season Ticket sales after going to the playoffs.
Demand Decreases
Demand Increase/Decrease: Demand for coke if the price of pepsi drops.
Demand Decreases
Demand Increase/Decrease: Popularity Declines
Elastic
Elastic/Inelastic: The cost requires a large portion of a consumer's income.
Substitute Goods
Product used instead of another product; Good used in place of another good; An increase in the price of a good/product causes an increase in demand. - Example: Sweatshirt ==> Jacket/Long Sleeved Shirt
Quantity Demanded
The amount of a good or service that consumers are willing and able to purchase at a particular price.
Purchasing Power
The amount of goods and services people can actually buy is their:
Income
The amount of money people make; An increase in __________ causes an increase in demand - Example: U.S. Economy = 2005 - 2008
D
The non-price determinants of demand include: A. Income, prices of related goods, and demand curves B. Consumer tastes, market size, and decisions by private businesses C. Demand curves, market size, and income D. Market size, income, and prices of related goods.
False
True/False: A demand curve allows you to see the interaction of a price and demand in a simple table format.
True
True/False: Complementary goods are goods that are bought in the expectation of having more income.
True
True/False: Consumer expectations about the future can affect the general level of demand.
Income Effect, Substitution Effect, and Diminishing Marginal Utility
What are the 3 Economic Concepts that Help Explain the Law of Demand?
Demand is the amount of an item that can be bought at various possible prices. Quantity Demanded is the amount of an item that can be purchased at a particular price
What is the difference between Demand and Quantity Demanded?
Indicates an increase in demand
When a demand curve shifts to the right, what does that indicate?
Consumer Expectations
How consumers perceive the future of a product High __________ __________ causes an increase in demand - Example: Star Wars Merchandise = August 2015 - October 2015
False
True/False: Private business decisions have no effect on market size.
Income Effect
The effect that a change in an item's price has on the consumer's ability to purchase goods; Any increase or decrease in the consumer's purchasing power caused by a change in price.
True
True/False: Demand schedules and demand curves chart how changes in price affect quantity demanded for a specific period of time.
True
True/False: Factors other than price can affect demand for a product over time.
True
True/False: Goods used to replace the purchase of similar goods when prices rise are called substitute goods.
True
True/False: In economic terms, demand is the amount of a good or service that a consumer is willing to buy at various possible prices during a given time period.
A
What 3 factors affect market size? A. Private Business Decisions, Consumer Expectations, and Income B. Consumer Expectations, Income, and Government Policy C. Private Business Decisions, Government Policy, and New technology D. Government Policy, New Technology, and Income
Substitute Goods and Complementary Goods
What are the 2 elements that make up Prices of Related Goods?