Week 3: Demand

When economists refer to a "good" they are referring to

a tangible product that consumers, firms, or governments wish to purchase

The law of demand states that:

as the price of a good, service, or resource falls, the quantity demanded will rise, all else held constant

A change in _____ occurs when a non-price determinant of demand changes

demand

Market demanded is the horizontal summation of individual _________ curves

demand

The law of _________ focuses entirely on the effect of a change in the good's price on the quantity of the product consumed and holds everything else constant

demand

When we draw a demand curve for a good or service, we only focus on the price of the good and the quantity demanded at each price. In this way, we only focus on the price of the good and the quantity demanded at each price. In this way, we are:

holding all else constant

Out of rationing mechanisms, such as prices, lotteries, first-come, first-served arrangements and contests ___ tend to be the most efficient mechanism for allocating goods, services and resources between competing uses

prices

In most markets ______ are determined by interactions of numerous buyers and sellers

prices

The demand curve:

can be a straight line or curve

When you plot the data from the demand schedule on the graph, the result is called the demand ______

curve

A _____ refers to a group of buyers and sells who exchange one specific good, services and resource, not necessarily to a specific place

market

A change in _____, all else held constant generates a change in quantity demanded

price

Along a demand curve, all else is held constant except the good's own _______

price

When graphing a demand curve, we always place _______ on the vertical axis

price

The income effect is the effect that a change to the

price of a good, service, or resource has on the purchasing power of income

The substitution effects is the effect that a change in the:

price of one good, service or resource has on the demand for another

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

prices

The demand curve can be drawn as

-a curve -horizontal -a straight line

Any price where, or mechanism by which, buyer and sellers interact to trade goods, services or resources is a ________

market

The market demand represents

the horizontal summation of individual demand curves

In a "market" prices and quantities traded are determined mostly by:

the interaction of buyers and sellers in a market

Two different ways in which we usually express information about the demand for a good, service or resources are:

-demand curve -demand schedule

The demand curve should slope down because:

according to the law of demand, a lower price will lead to a higher quantity demanded

The demand curve for a good displays:

all the information found in the demand schedule for the good

In economics the word "curve" is typically used to refer to:

almost any graphic representation of the relationship between two variables

The demand schedule represents the relationship between the price of a good, service or resource

and the quantity that individuals and firms are willing and able to buy, all else held constant in table form

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

buy

When the price of a good rises, we can expect that:

less of the good will be purchased

When we talk about demand for a product (sunglasses), we are referring to the:

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

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

resource

In a market _________ seek to charge the highest price they can for a good or service

sellers

An intangible product or action that consumers, firms, or governments wish to purchase is a:

service

When the price of oranges increases, Jack buys more apples and fewer oranges. The decrease in the quantity demanded for oranges and the increase in the quantity demanded for apples is an example of the _________ effect

substitution

The overall or total demand for a good, service, or resource is:

the market demand

When markets and prices are used to allocate, or ration goods, services and resources, the allocation is determined by primarily by:

the willingness and ability to pay the market price

A shift in the entire demand curve is called

a change in demand

Because if diminishing marginal utility, the benefit of consuming more of a good:

falls with each additional unit, so the price consumers are willing and able to pay falls with increased consumption

A change in quantity demanded an be described as

a movement along the demand curve that results from a change in the good's own price

You go to a baseball game on "dollar dog" night. First inning you have 3 dogs. In the fourth inning, you have 1 more dog, but it takes longer to finish. In the eighth inning, you get 1 more dog, but only finish half the dog. This scenario is an illustration of the:

law of diminishing marginal utility

The demand curve is downward - sloping because:

- as prices rise, the purchasing power of each dollar earned falls, and consumers are willing and able to buy less of a good. - as consumers purchase substitutes, the quantity demanded of the good falls. - the 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.

The three main reasons why demand curves are downward - sloping are:

-diminishing marginal utility -the income effect -substitution effect

The income effect:

-doesn't refer to a change income -refers to the change in purchasing power when the price changes

Competition between suppliers tend to drive price _______; competition between buyers tends to drive prices __________

-down -up

________ markets are highly structured, whereas ________ are less structured, with fewer rules

-formal -informal

In most markets _______ is determined by the interactions of numerous buyer and sellers

-the price of goods and services -the price of labor

Jack likes tacos. He values the first taco at $5, the second at $4, third at $3 and fourth at $2. If the price of tacos is $3.25, Jack will buy _______ tacos.

2

The entire demand curve shifts to the right or left:

When there is a change in demand