Economy: Chapter 4

What does it mean when the demand for a product is inelastic? People will not buy any of the product when the price goes up. A price increase does not have a significant impact on buying habits. Customers are sensitive to the price of the product. There are very few satisfactory substitutes for the product.

A price increase does not have a significant impact on buying habits.

What is a basic principle of the law of demand? The higher the price, the more people will want the good. Everyone has a limited income that they will spend. When a good's price is lower, people will buy more of it. Services are of interest in the same way that goods are.

When a good's price is lower, people will buy more of it.

What type of economic system is the United States economy based on? cause and effect centralized market production

market

Select the term: A good that is always used with another good elasticity of demand substitution effect law of demand complement substitute

complement

What kind of changes would be expected in the demand of a country that has an increasing population? a rise in the demand for recreation a shift in the demand for high-quality food a rise in the demand for shelter a lowering in the demand for automobiles

a rise in the demand for shelter

What determines the price and the quantity produced of most goods? the consumer's perception of necessity the interaction of supply and demand the availability of substitutes for the goods the quality of the goods that are produced

the interaction of supply and demand

How did the existence of the baby boom generation change demand in the United States? Demand was raised for different goods with each age the baby boomers reached. After they reached the teenage years, the baby boomers were integrated into the society and no longer affected demand. People were poorer because they had so many children, so demand was lowered. The baby boomers did not raise demand until they became adults, when they had their own money to spend.

Demand was raised for different goods with each age the baby boomers reached.

How is the current demand for a good related to its future price? If the price is expected to drop, current demand will fall. If the price is expected to drop, current demand will rise. If the price is expected to rise, current demand will fall. Current demand is not related to future price.

If the price is expected to drop, current demand will fall.

How is future price related to current demand? If the price is expected to rise, current demand will drop. If the price is expected to fall, current demand will rise. If the price is expected to rise, current demand will rise. Future price is not related to current demand.

If the price is expected to rise, current demand will rise.

When prices rise, what happens to income? It goes down. It buys less. It rises to meet prices. It is used to buy different things.

It buys less.

Ceteris paribus, or "all other things held constant," is an assumption that has what effect on a demand schedule? It takes only prices into account. It considers the effects of all possible changes on demand. It is accurate no matter what changes occur. It is accurate only at one price level.

It takes only prices into account.

What does unitary elastic demand mean? The elasticity of demand is mathematically determined. The elasticity of demand is different at each unit on the price range. The demand is inelastic at a low price but becomes elastic as the price rises. The percentage change in quantity demanded is exactly equal to the percentage change in price.

The percentage change in quantity demanded is exactly equal to the percentage change in price.

A shift in the demand curve means . . . a change in demand at every price a rise in prices a decrease in both price and quantity demanded a change in consumer income

a change in demand at every price

When a consumer is able and willing to buy a good or service, s/he creates ____________ . consumption demand elasticity allocation

demand

Select the term: A graphic representation of the quantities of a good that will be bought at each price demand curve income effect elastic inferior good

demand curve

What kind of table lists the quantity of a good that an individual person will buy at different prices? demand schedule demand curve market demand schedule market demand curve

demand schedule

Select the term: Demand that is very sensitive to a change in price demand curve income effect elastic inferior good

elastic

Select the term: A measure of how people change their buying patterns when prices change elasticity of demand substitution effect law of demand complement substitute

elasticity of demand

What determines how a change in prices will affect total revenue for a company? elasticity of demand the company's pricing policy values of elasticity the consumers' incomes

elasticity of demand

Select the term: The change in consumption resulting from a change in real income demand curve income effect elastic inferior good

income effect

Select the term: A good for which the demand falls when income rises demand curve income effect elastic inferior good

inferior good

Select the term: The way that a change in price determines whether or not consumers buy goods elasticity of demand substitution effect law of demand complement substitute

law of demand

Which good would be likely to be bought in the same quantity even if it doubled in price? shoes telephones pencils computers

pencils

Select the term: A good that replaces another demanded good elasticity of demand substitution effect law of demand complement substitute

substitute

Select the term: What happens when consumers react to an increase in a good's price by consuming less of that good and more of other goods elasticity of demand substitution effect law of demand complement substitute

substitution effect