Demand

Question 1

what is demand?

Answer 1

quantity at which an individual is willing and able to purchase at a given price

Question 2

law of demand?

Answer 2

there is an inverse relationship between price and quantity

if the price falls, the quantity demanded increased; if the price rises, the quantity demanded decreases

Question 3

there is an inverse relationship between price and quantity due to ___ ____

Answer 3

marginal utility

Question 4

what is individual demand?

Answer 4

individuals have their own levels of demand

Question 5

what is market demand?

Answer 5

total demand by all individuals

Question 6

change in price will/will not cause a change in demand

Answer 6

will NOT

Question 7

a change in price will cause a change in ____ with the same demand

Answer 7

quantity

Question 8

rise in price, ___ in quantity

this is a ___ and a movement ___ the curve

Answer 8

decrease, contraction, ALONG

Question 9

decrease in price, ___ in quantity

this is a ___ and a movement ___ the curve

Answer 9

increase, expansion, ALONG

Question 10

any other factors than price will cause a change in demand curve

true or false

Answer 10

true

Question 11

factors causing changes to demand? (6)

Answer 11

income, population, tastes, price of substitutes, price of complements, expected future prices

Question 12

income: an ___ in disposable income causes more goods and services to be produced. Certain goods have ___ demand as people’s income rises (____ goods) as they are cheaper items used to survive (rice, potatoes). Goods that ____ in demand as income rises are called ____goods.

Answer 12

increase, decreased, inferior, increase, normal

Question 13

population
an ____ in population will cause an increase in demand

Answer 13

increase

Question 14

Tastes:
fashions and trends ___ demand

Answer 14

change

Question 15

Prices of substitutes: products used ____ of another; when the price of one rises, then the demand for the substitute ____

Answer 15

in place, increases

Question 16

Price of complements: used in conjunction with another product; demand and price are _____related here- when the price for the complementary good is high, the demand for the original good is ____, and vice versa when the price for the complementary good is low, the demand for the original good is ____

Answer 16

inversely, lower, higher

Question 17

Expected future prices: if consumers believe that prices will ____ in the future, they will buy more now (demand ____); consumers believe prices will fall, they will hold off purchasing (demand ____)

Answer 17

increases, increases, decreased

Question 18

Law of diminishing marginal utility: consumers buy ___ of a good with a higher marginal utility and ___ of goods with lower marginal utility

Question 19

Law of demand will not hold for ____ goods (bread rice) (Giffen goods); or ___goods (Veblen goods)

Answer 19

inferior, luxury

Question 20

what is elasticity?

Answer 20

responsiveness of one variable to a change in another

Question 21

what is price elasticity of demand (PED)?

Answer 21

measure of responsiveness of a change in quantity demanded from a change in price

Question 22

elastic demand: ___ response to change in price

Answer 22

strong

Question 23

unit elastic demand: ____ response to a change in price

Answer 23

proportional

Question 24

inelastic demand: ___ response to a change in price

Answer 24

weak

Question 25

perfect price inelastic demand: price rises, quantity demanded will ___ __ ___ e.g, ____ curve will be _____

Answer 25

remain the same, medication, vertical

Question 26

perfectly price elastic demand: change in price is not possible as no one will demand these products for a different price true/false

Answer 26

true

Question 27

perfectly price elastic demand: e.g, ___ curve will be ____

Answer 27

fruits, veggies, oils. horizontal

Question 28

factors affecting elasticity of demand? name 3

Answer 28

- necessities and luxuries - existence of close substitutes - complementary goods - proportion of income spent on good - length of time since price change

Question 29

perfectly vs relatively inelastic? perfect- change in price ___ ___ result in a change in quantity demanded relative- change in price ___ result in a change in quantity

Answer 29

will not, may