Learnsmart Chapter 4 Econ
What is marginal utility?
The additional usefulness or benefit you get from consuming or using one more unit of a good or service
What would happen if people's tastes or preferences for an item suddenly increased?
Their demand curve would shift to the right. Their demand for the item would increase.
In economics, the term "marginal" always means
extra
Change in price An increase in demand A change in tastes or preferences An increase in income A decrease in demand
The result is a change in quantity demanded. State and federal income taxes are lowered. Summer is over and some clothes are going out of style. The result is a shift in the entire demand curve to the right. People move out of the city because of a lack of jobs.
The difference between a demand schedule and a demand curve is that the demand presents information graphically or visually.
The schedule is a tabular listing, whereas the curve is a figure or a graph.
What would happen to people's demand if they had a decrease in income?
Their demand curve would shift to the left because they would purchase a little less of the things they usually buy.
Which statement describes the difference between a change in demand and a change in quantity demanded?
There is no change in price when there is a change in demand, whereas a change in quantity demanded always involves a change in price.
Which statement(s) illustrates the income effect?
This behavior is observed over and over again in the marketplace.
If only three people are interested in buying a product, we could say that the
demand for any one of the three individuals would represent an individual demand curve. sum of their demands would make up the market demand curve.
A table like this one, which shows the different amounts demanded over a possible range of prices, is called a
demand schedule
Because people buy different quantities of a product when its price changes, we say that prices act like an that influences our behavior.
incentive
The market demand for a product would if more consumers entered the market.
increase
If a change in price causes a less than proportional change in demand, then demand is
inelastic
If a purchase does not require a large portion of the buyer's income, the product is likely to have _______ demand.
inelastic
Suppose that the change in a product's price is 10%, and this causes an 8% change in quantity demanded. The product's demand elasticity is
inelastic
The owner of a local hardware store wanted to increase his revenue by running a sale on a popular product. He lowered the price by 10% and discovered that total sales revenue actually fell by 5%. He was confused by this outcome until someone told him about
inelastic demand.
The Law of Demand states that the quantity demanded varies with changes in its price.
inversely
Suppose that you like two soft drinks equally well. The fact that they are close substitutes for each other means that
you are more likely to switch from one to the other if one has a price change.
A good that is easy to postpone is likely to have _______ demand curve.
an elastic
If people bought 20 units of a product at $10 each, total expenditures (or total revenue to the seller) would be $
200
Point "a" on the figure shows two units demanded at a $3 price. This means that total expenditures amount to $
6
What does the figure here illustrate?
A change in demand
What would cause a change in consumer demand?
A change in tastes or preferences A change in expectations A change in price of a related good A change in income
Elastic demand Inelastic demand Unit elastic demand
A decrease in price from $3 to $2 increases total revenue from $6 to $8. A decrease in price from $3 to $2 decreases total revenue from $6 to $5. A decrease in price from $3 to $2 leaves total revenue unchanged at $6.
Which of the following illustrates a decrease in price?
A movement down and along a demand curve
Which of the following factors are likely to indicate elastic demand?
A product that has adequate substitutes A purchase that is easily delayed
Elastic demand Unit elastic demand Inelastic demand.
An increase in a product's price from $2 to $3 decreases quantity demanded from 4 units to 2 units. A product's price increases from $2 to $3. This decreases the quantity demanded from 3 units to 2 units. Inelastic demand matches Choice An increase in a product's price from $2 to $3 decreases the quantity demanded from 2.5 units to 2 units.
Why does anyone who goes into business need to understand demand elasticity?
Because one of the most popular ways to raise revenues, or so it is thought, is to raise prices Because changes in prices and changes in revenues are different under different cases of elasticity
Elasticity is a measure of responsiveness that describes the way a(n) variable affects a(n) variable.
Blank 1: independent Blank 2: dependent
When the price of something goes up, you tend to buy , and when the price goes down, you tend to buy
Blank 1: less or fewer Blank 2: more
True or false: A change in quantity demanded happens when people buy different amounts of a product at the same price.
False
How can a change in the price of a substitute good affect demand for another good?
If a good has a satisfactory substitute, consumers can easily switch from one good to another. If a good does not have a satisfactory substitute, consumers are much less likely to switch away from the original good.
Which statement(s) illustrates the income effect?
If the price of pizza goes down, you will feel a bit "richer" and will have more money to spend on it. If the price of burritos goes up, it will make you feel a little bit poorer and so you will buy fewer burritos.
Higher prices are usually associated with smaller amounts demanded, whereas lower prices are usually associated with larger quantities demanded. This is known as the
Law of Demand.
In economics, is almost always the independent variable, or the variable that causes the quantity demanded to change.
Price
Elastic demand Unit elastic demand Inelastic demand..
Price changes by 10%, causing a 15% change in quantity demanded. A 20% price change causes a 20% change in quantity demanded. A 15% price change causes a 12% change in quantity demanded.
Elastic demand Unit elastic demand Inelastic demand
Price changes by 10%, causing a 15% change in quantity demanded. A change in price causes a proportionally equal change in quantity demanded. A change in price causes a proportionally smaller change in quantity demanded.
What is the difference between a market demand curve and an individual demand curve?
The market demand curve shows quantities demanded by everyone interested in purchasing the product.
True or false: A change in price is the only thing that can cause a change in quantity demanded.
True
True or false: According to the income effect, part of the change in quantity demanded due to a change in price is due to a change in the consumer's income.
True
True or false: The figure here illustrates a change in quantity demanded. The change from point "a" to point "b," or from "b" to "a" can only be caused by a change in price.
True
What would you do if you expected the price of gasoline to go up in the next few days?
Try to fill your tank before the price went up
Which case of demand elasticity requires a proportional change to both price and quantity demanded?
Unit elastic demand
The only thing that can cause a change in quantity demanded is
a change in price.
A change in price is the only thing that can cause
a change in quantity demanded.
When the demand for a good is elastic, a change in price causes
a relatively larger change in quantity demanded.
If a product's demand curve is unit elastic, then any change in price will cause
an equally proportional change in quantity demanded.
In the case of unit elastic demand illustrated in the figure, revenue
never changes when price changes.
The assumption called ______ is used to keep other things constant when analyzing the impact of one variable on another.
ceteris paribus
If you decide to buy different amounts of a product even though the product's price did not change, this would be called a
change in demand
The price of pizza at a local shop has not changed. However, this week you have decided to buy more than usual. This action would be described as a
change in demand
Two goods would be if the use of one increases the use of the other.
complements
The difference between a demand schedule and a demand curve is that the demand presents information graphically or visually.
curve
Because market demand is the sum of all individual demands, market demand would if some consumers leave the market.
decrease
If two goods are complements, meaning that the use of one increases the use of the other, an increase in the price of one good will
decrease the demand of its complement.
At a given point in time, the price of a product and the quantity that someone is willing to buy are the only two variables needed to calculate
demand
The various amounts of a product someone is willing and able to buy over a range of possible prices at one point in time is called
demand
The extent to which a change in price causes a change in quantity demanded is known as
demand elasticity.
If a change in price causes a proportionately larger change in quantity demanded, demand is
elastic
If a product consumes a relatively large portion of a buyer's income, the good is likely to have ______ demand.
elastic
If a product has adequate substitutes, it is likely to have demand.
elastic
The ability to postpone a purchase usually makes a product or service
elastic
When considering elasticity, the demand for gasoline is likely to be more for a particular station than for the product in general.
elastic
The basketball cheerleaders at your school had a bake sale on Monday and sold 30 cookies at $2 each. The next day they lowered the price to $1.50 and sold 60 cookies. What was the elasticity of demand for cookies?
elastic demand
If a product has adequate substitutes available, its demand elasticity is likely to be
elastic, because it is easier for consumers to switch back and forth between the product and its substitutes to take advantage of the best price
The downward slope of an individual's demand curve reflects the
fact that every additional item consumed yields slightly less satisfaction or usefulness. diminishing marginal utility a person gets from consuming or using each additional unit.
True or false: The demand for gasoline at a particular station is inelastic, but demand for gasoline in general is elastic.
false
Economists like to call something a when predictable behavior is observed over and over again.
law
We say that prices act as an incentive, because when prices go up most people tend to buy
less
Let's suppose that peanut butter and jelly are two complementary goods you always use together. If the price of peanut butter goes way up, you are likely to buy
less jelly
Whenever we see the price of a good or service go up, people usually buy or demand
less of it
The sum of everyone's individual demand curves in a market makes up the
market demand curve.
The part of economic theory that deals with behavior and decision making by individual units such as people and firms is called
microeconomics
A good that requires a large amount of income for the purchase is likely to have a
more elastic demand curve because buyers will be more careful when evaluating a purchase. more elastic demand curve because large purchases can sometimes be postponed.
Suppose you are in the market for a new high-tech smart watch. You are almost ready to make a purchase, but you find out that a competitor is about to introduce a watch with more features and a lower price. This would probably cause you to
not buy until you learn more about the competitor's smart watch.
Look at the figure. The market demand curve is the image
on the right
For the case of elastic demand illustrated in the figure, the change in price and the change in revenue move in
opposite directions.
Ceteris paribus is a Latin term for
other things held constant.
A change in demand happens when
people decide to buy different amounts of a product even when the price of that product does not change.
Demand elasticity is the extent to which a change in
price causes a change in quantity demanded.
At a given point in time, the calculation of demand comes down to just two variables. They are the
price of the product and the quantity that someone wants to buy at that price.
A demand like the one shown here is a tabular listing of various quantities demanded over a range of possible prices.
schedule
An increase in consumer income would
shift the demand curve to the right.
Margarine is known as a good, and demand for it increases if the price of butter rises too much.
subsitute
Some products are known as because they can be used in place of other products.
substitute
The effect is the change in quantity demanded because of a change in relative prices.
substitution
Suppose you like burritos and pizza equally well. If burritos were to go on sale next week, you would probably buy more burritos. This illustrates the
substitution effect.
In the case of inelastic demand illustrated in the figure, the change in price and the change in total revenue move in
the same direction
Two goods would be complementary goods if
the use of one increased the use of the other. an increase in the price of one decreased demand for the other.
The term "demand" refers to
the various amounts of a product someone is willing and able to buy over a range of prices at one point in time
True or false: A person who goes into business needs to have a basic knowledge of elasticity because some price increases will lead to increases in revenue, while others do not.
true
True or false: Microeconomics is the part of economic theory that deals with the behavior and decision making by individual units such as people and firms.
true
Your neighbor had a summer job mowing lawns. She started out charging $30 and serviced 10 lawns. She then lowered her fee to $20 to get more business, but was only able to add 5 more lawns. It turns out that the demand for her services was
unit elastic
Because marginal utility diminishes whenever we consume one more unit of a good or service,
we usually want to pay less for it.