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ECON DMND QUIZ 2017

Mr. Stickler's Liberty Christian ECON. Demand Unit Quiz Flashcards 2017

QuestionAnswer
What does the term "demand" mean/ refer to? This term refers to "the desire, ability, and willingness to buy a product". (Pg. 91)
What does the term "microeconomics" mean/ refer to? This term refers to "the part of economic theory that deals with behavior & decision making by individual units, such as people and firms. (Pg. 91)
What does the Law of Demand state? This states that the quantity demanded is inversely related with its price. In other words, when price goes up, quantity demanded goes down (& vice versa). (Pg. 93)
What does the term "Marginal Utility" mean/ refer to? This term refers to "the extra usefulness or additional satisfaction a person gets from acquiring or using one more unit of a product". (Pg. 95)
What does the term "Diminishing Marginal Utility" mean/ refer to? This term refers to "the principle which states that the extra satisfaction we get from using additional quantities of a product begin to decline." (Pg. 95)
Give an example of how "Diminishing Marginal Utility" works. One example of this would be if you buy a drink when you are thirsty. Once you buy the first drink, you aren't as thirsty anymore, so you won't be as satisfied with your purchase if you buy a 2nd or 3rd drink. (Pg. 95)
What is the Income Effect? This happens when there is a change in the quantity demanded because of a change in price that alters consumers' real income. (Pg. 98)
What is the Substitution Effect? This is "the change in quantity demanded because of the change in the relative price of the product, which causes the consumer to purchase a lower - priced substitute product." (Pg. 98)
What does the term "change in demand" mean/ refer to? This refers to instances whereby consumers purchase different amounts of a product at the same price. It creates an entirely new demand curve when it happens. (Pg. 99)
List the six (6) things that can result in a change in demand. 1.) Consumer income; 2.) Consumer Tastes; 3.) Substitutes; 4.) Complements; 5.) Expectations; 6.) Number of Consumers. (Pgs. 99 - 101)
What are "substitutes" (where economics is concerned)? These are products that can be used in place of other products. for example, Honda cars can be substitutes for Fords if the price of Ford vehicles goes up. (Pg. 100)
What are "complements" (where economics is concerned)? These are products whose use increases the use of another, related product. (Example: ketchup. People don't eat ketchup by itself, but when it is served with french fries, people will use both products.) (Pg. 101)
What does the term "elasticity" mean/ refer to? This term refers to "a general measure of responsiveness . . . it tells us how a dependent variable, such as quantity demanded, responds to a change in the independent variable, such as price." (Pg. 103)
When we compute the elasticity of demand, what are we trying to find out? When we compute this, we are trying to find out whether price changes will effect the quantity of products that consumers will demand.
What does the term "elastic" mean where "elasticity of demand" problems are concerned? This term means that for every 1% that we increase a product's price, there will be a larger than 1% decrease in the quantity demanded.
What does the term "inelastic" mean where "elasticity of demand" problems are concerned? This term means that for every 1% that we increase a product's price, there will be a less than 1% decrease in the quantity demanded.
Why is it important to compute the exact equilibrium price and quantity instead of simply charting the demand schedule on a graph? We need to do this so that, when we set prices, we do not end up with a shortage or surplus of products. (Class notes.)
What is one (1) difference between a "change in demand" vs. a "change in quantity demanded"? A change in quantity demanded is a change in a single quantity that happens as a result of a change in price; "change in demand" is a change in all quantities demanded at all possible prices. (Pgs. 98 & 99)
When there is a "change in demand", which way does the "demand curve" move on the chart? Which way does it move when there is a "change in quantity demanded"? When there is a "change in demand", the curve can move to the right. When there is a "change in quantity demanded", there is a movement along the original demand curve. (Pg. 99)
What happens (per the Law of Demand) when the price of a good/service rises? When this happens, consumers look for substitutes (i.e. fewer consumers will continue to buy the good/service at the higher price).
What is the relationship between the "demand schedule" and the "demand curve"? The "demand curve" is a graphical representation of the information given in a "demand schedule".
What is the definition of a "Market Economy"? In this type of economy, ". . . people and firms act in their own best interests to answer the basic WHAT, HOW, and FOR WHOM questions". (Pg. 92)
What is the difference between an "Individual Demand Curve" and a "Market Demand Curve"? "Individual Demand Curves" is a graph that shows "the quantity demanded at each and every price that might prevail in the market. "Market Demand Curves" show "the quantities demanded by everyone who is interested in purchasing the product". (Pgs. 93 & 94)
How do you create a "Market Demand Curve"? You create this by adding the quantities demanded by each individual in a market and plotting the new total on the "Market Demand Curve". (See example in fig. 4.2, pg. 94).
Although people buy more of a product when the seller lowers the price, some items such as luxury goods are not offered at a lower price. What principle from our first unit helps explain why this happens? The "Diamonds and Water Paradox" helps explain this. Luxury goods are both rare and useful. Because they are (typically) rare, they fall under this principle.
What three (3) questions can we ask ourselves that will help us determine a product's "demand elasticity"? 1.) Can the Purchase be Delayed? (If it can, it is usually "inelastic") 2.) Are Adaquate Substitutes Available? (If there are, it is usually "elastic") 3.) Does the Purchase Use a Large Portion of Income? (If it does, it tends to be "elastic".) (107-109)
Created by: sticklerpjpII