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