Economics Ch. 4
How would you describe a demand curve?
A graph that shows the amount of an item a consumer will buy at each price
Why would gasoline be considered inelastic?
No matter how the price changes people will always buy it because they need it
Compare normal goods to inferior goods.
Normal Goods: demanded more when consumers income rises Inferior Goods: Demanded less when consumers income rises
How is total revenue calculated?
Product price multiplied by quantity demanded
What is consumer taste?
Products gain and lose popularity when people's desires change
How can income as a factor affect demand?
a person's ability to buy goods is affected by their income
What is a market demand schedule?
a table that summarizes all consumer's behavior
What is a market demand curve?
amount all consumers will buy at each price
Define income effect.
amount people buy changes as purchasing power of their income changes
How can income affect demand?
amount people buy changes as purchasing power of their income changes
Define income affect and create an example.
amount people buy changes as their income changes (ex. Tina can't buy a Tory Burch purse if she gets laid off and no longer has an income.)
What is the substitution effect?
amount people buy changes as they substitute products
How does market size influence demand?
as the number of consumers change so does demand
How can market size affect demand?
as the number of consumers increases/decreases so does the demand/market
As sales in digital cameras increase, so do sales of photo printers. What factor is affecting demand?
complimentary goods
What is the difference between a demand curve and a market demand curve?
demand: single consumer Market demand: whole group of consumers
What 2 factors are necessary for demand?
desire and ability to pay
How do complementary goods affect demand schedule?
increase in quantity demanded
If quantity demanded does not change significantly when prices change, how is demand described?
inelastic
What does a demand curve look like when demand is unit elastic?
large slope from top left to bottom right
What are products that consumers demand less of when their income rises?
luxury items
Define the concept of diminishing marginal utility.
marginal benefit of each additional unit declines as each unit is used
Why is electricity considered inelastic?
people will always need it no matter how the price changes
How can consumer taste affect demand?
products gain/lose popularity when consumers change their desires
Define substitution.
products used in place of one another
What do the different points on a demand curve measure?
quantity demand at a certain price
What does elasticity of demand measure?
quantity demand at a certain price
According to the law of demand, what happens when prices go down?
quantity demand goes up
When demand is elastic, how does the percentage change in quantity demanded compare to the percentage change in price?
quantity demanded changes greatly as price changes
What do various points on a demand curve represent?
quantity sold at a certain price
What would be some examples of inelastic demand?
salt, insulin, gas
What is the purpose of an individual demand curve?
show the amount of an item a consumer will buy at a certain price
What explains the shape of a demand curve?
slopes down from the top left to the bottom right with the prices on the vertical line and quantity on the horizontal
What assumption is used when making demand curves?
the quantity each person wants
What are the purposes of a market demand schedule?
to summarize all consumer behavior
What does an inelastic demand curve look like?
top left to bottom right at a short decrease
What is the purpose of Market research?
used to see what consumers want and also be used to create market supply schedule
According to the law of demand, what is the relationship between quantity demanded and price?
when price goes up, quantity demanded goes down and vise versa
Define the elasticity of demand.
when quantity demanded changes as prices change
Make up an example of consumer expectation.
when the new iphone comes out people will wait to get it once the price drops