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Econ 4
| Question | Answer |
|---|---|
| When does demand exist? | When consumers are willing to buy and are able to pay |
| Law of demand | Consumers will buy more of a good when it's price is lower, and less when it's price is higher |
| Substitution effect | Consumer reacts to a pice in price of one good by using less of that good and more of a substitute good |
| Income effect | Change in consumption that results when a price increase causes real income to decline |
| Demand | Desire to own something and the ability to pay for it |
| Demand Schedule | Table that lists the quantity of a good a person will buy at various prices in the market |
| Market Demand Schedule | Table that lists the quantity of a good all consumers will buy at various prices |
| Demand Curve | Graphic representation of a demand schedule |
| Why does an economist create a market demand schedule? | To see how a market would change if conditions in an area changed |
| What does it mean when you have demand for a good or service? | Consumer is willing and able to buy it at the gioven price |
| If prices rise but no income, what is the effect on demand? | Fewer goods are bought |
| What happens when the price of Item A increases? | Consumers buy the cheaper Item B as a substitute |
| Normal goods | Goods that consumers demand more of when incomes increase |
| Inferior goods | Goods for which demand falls as income increases |
| Complements | Two goods that are used together |
| Substitutes | Goods used in place of another |
| Demographics | Statistical information about populations |
| Ceteris parabus | The assumption that nothing other that the price of a good will change |
| How can expectations about the future change consumer behavior? | Demand for a good rises if its price is expected to rise. |
| How might advertising lead to shift in the demand curve? | By helping to create fads and trends |
| When will increase in demand for one good increase the demand for another? | When goods are used together |
| What can cause and entire demand curve to shift? | A change in demographics, population, consumer taste, income, consumer expectations |
| If a person expects the price of and item to rise, how does this affect demand for a product? | Demand increases so the consumer can purchase the product before the price increases |
| Elasticity of demand | A measurement of how demand will change when prices change |
| Inelastic | When demand stays about the same after prices change |
| Unitary elasticity | If demand falls by exactly half when the price doubles |
| Total revenue | The amount of money a company receives from selling its goods |
| Elastic | A sharp fall in demand after a price increase |
| Necessities | Products with inelastic demand-will buy no matter the price |
| If a company raises the price of a product with elastic demand, what will happen to total revenue? | Total revenue will go down because people will substitute another cheaper good for the good who's price went up. |
| Inelastic Demand | Revenue falls when price lowers, revenue rises when prices raise |
Created by:
sudokken
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