Economics chapter 4

Three factors that determine elasticity of demand

1. Substitute goods or services 2. Proportion of income 3. Necessities versus luxuries

What is a market demand curve?

A graph showing how much of a product a market is willing and able to buy

What is a demand schedule?

A table showing how much of a product and individuals willing and able to buy.

The change in the amount demanded because of a change in price

Change in demand

And increase or decrease in the amount that consumers are willing and able to buy in response to a change in price

Change in quantity demanded

What do you various points on a demand curve represent?

Change in quantity demanded

Goods and services that are used together

Complements

And after sets off a crazy for wearing camouflage clothing among her friends. What factors affecting demand?

Consumer taste

Which economic term is defined as the desire to have a good or service and ability to pay for it?

Demand

What two factors are necessary for demand?

Desire for a good or service and the ability to pay for it

If quantity demanded changes significany when price changes, how is demand described?

Elastic

When change in price leads to a relatively larger change in the quantity demanded

Elastic demand

How responsive consumers are to price changes in the marketplace

Elasticity of demand

Which economic concept is defined as the measure of how responsive consumers are to price change?

Elasticity of demand

Which of the following categories is most likely to have inelastic demand?

Goods that have no substitutes

A factory closes, laying off hundreds of workers, and consumer spending in the town falls, what factors are affecting demand?

Income

A change in the amount that consumers will buy because they buy other goods instead

Income effect

If quantity demanded does not change significantly when price changes, how is demand described?

Inelastic

When change in price leads to smaller change in quantity demanded

Inelastic demand

Goods that consumers demand less of when their incomes rise

Inferior goods

Which of the following describes a demand curve?

It slopes downward from left to right

The idea that the marginal benefit of using each additional unit of a product during a given period will decline

Law of diminishing marginal utility

What do business owners use to gather information for market demand schedules?

Market research

Skiers flock to a town in the Rockies in January, and restaurant business booms. What factors affecting demand?

Market size

How is total revenue calculated?

Multiplying price by quantity sold

Goods that consumers demand more of when their incomes rise

Normal goods

What term is defined as goods that consumers demand more of when their incomes rise?

Normal goods

How does the slope on an elastic demand curve look?

Shallow slope

Goods and services that can be used in place of each other

Substitutes

Many US consumers have switched to wireless phones from traditional telephones. What factors affecting demand?

Substitutes

A change in the amount that consumers will buy because the purchasing power of their money changes

Substitution effect

What term is defined as the change in the amount consumers will buy because they can buy a different product instead?

Substitution effect

What outside forces affect your demand for products?

The demand for a product will be influenced by price, income levels, consumer preference, competition, and fashions.

Demand for leather coats?

The demand for leather coats would be elastic because leather coats would be a luxary because there are many substitutes for them

States that the marginal benefit of using each additional unit of a product during a given period of time will decline

The law of diminishing marginal utility

What explains the shape of a demand curve?

The law of diminishing marginal utility

What is elasticity?

The measure of how responsive consumers are to price change

What does a market demand curve show?

The sum of all the individual demand curves in a market

Why is a total revenue test used for?

To measure elasticity

Which of the following restates the law of demand?

When prices go up, quantity demand increases; when prices go up, quantity demand decreases