10 Questions
Explain the Income Effect in relation to the demand curve.
The Income Effect occurs when the price of a good falls, increasing the purchasing power of consumers' incomes, allowing them to buy more of the good.
What is the Law of Demand?
The Law of Demand states that as the price of a good or service decreases, the quantity demanded for it increases, and vice versa.
What are Giffen Goods and how do they behave in relation to price changes?
Giffen Goods are goods that, uniquely, experience an increase in demand as their price increases, making them an exception to the Law of Demand.
What distinguishes Veblen Goods from other goods in terms of price and demand?
Veblen Goods are goods that become more desirable as their price increases, making them exceptions to the Law of Demand.
What are some exceptions to the Law of Demand?
Some exceptions include Giffen goods, Veblen goods, possible price changes, and essential goods.
What happens to the demand for goods when they become a status symbol due to an increase in price?
The demand for those goods also increases.
How can the expectation of a significant price increase in the future affect the demand for a good?
Consumers may buy more of it even at a higher current price, causing the demand curve to slope upwards temporarily.
What happens to the demand for necessary goods like medicines or basic staples when their prices increase?
The demand remains unaffected.
How does a change in income impact the demand for products?
Sometimes, the demand for a product may change according to the change in income. If household income increases, they may purchase more products regardless of price changes.
Define price equilibrium and what conditions are present at this point?
Price equilibrium is where the quantity of a good demanded equals the quantity supplied by producers at a particular price level. At this point, the quantity demanded equals the quantity supplied, there is no excess demand or supply in the market, and buyers are willing to purchase exactly what producers are willing to sell at the prevailing price.
Explore the properties and laws of the demand curve, including the Law of Demand and the downward sloping curve. Learn about exceptions and factors like the income effect that can influence the relationship between price and quantity demanded.
Make Your Own Quizzes and Flashcards
Convert your notes into interactive study material.
Get started for free
