Economics Chapter 4: Demand Theory

What is the relationship between the price of a commodity and the quantity demanded?

Inverse or opposite

What type of goods have a demand curve with a negative slope?

Normal goods

What is measured on the horizontal axis of a demand curve?

Quantity demanded

What is a necessary condition for demand to exist?

Both willingness and ability to purchase Signup and view all the answers

What is a demand schedule?

A table showing the different quantities of a good that a person is willing and able to buy at various prices Signup and view all the answers

What is the difference between demand and quantity demanded?

Demand is general, while quantity demanded is specific Signup and view all the answers

What type of goods are staple foods an example of?

Giffen goods Signup and view all the answers

What happens to the quantity demanded of normal goods when their prices increase?

It decreases Signup and view all the answers

What is the shape of the demand curve for normal goods?

Downward sloping Signup and view all the answers

What determines the quantity demanded of a commodity?

Both the price and other factors, such as consumer preference Signup and view all the answers

What is the time period referred to in the definition of demand?

A specific period of time, such as a week or a month Signup and view all the answers

What is derived from a demand schedule?

Demand curve Signup and view all the answers

What is a characteristic of inferior goods, including Giffen goods?

Their demand increases as their price increases Signup and view all the answers

Why does the demand for a Giffen good increase when its price increases?

Because the consumer is left with no other alternative but to buy the good Signup and view all the answers

What is true about all Giffen goods?

They are all inferior goods Signup and view all the answers

What do determinants of demand refer to?

Factors that affect quantity demanded Signup and view all the answers

What is the purpose of a demand function?

To explain the relationship between quantity demanded and factors that affect it Signup and view all the answers

What is the shape of the demand curve for a Giffen good?

Upward sloping Signup and view all the answers

What is the effect of an increase in the price of a normal good on the quantity demanded?

The quantity demanded decreases Signup and view all the answers

What is the effect of an increase in the price of a substitute good on the quantity demanded of the other good?

The quantity demanded of the other good increases Signup and view all the answers

What happens to the quantity demanded when the income of the consumer increases?

The quantity demanded increases Signup and view all the answers

What is the effect of an increase in the price of a related commodity that is a complement on the quantity demanded of the other good?

The quantity demanded of the other good decreases Signup and view all the answers

What is the effect of an increase in the price of a Giffen good on the quantity demanded?

The quantity demanded increases Signup and view all the answers

What is the term for commodities that are substituted one for the other?

Substitute goods Signup and view all the answers

What is the total market demand at a price of k90?

7 units Signup and view all the answers

What is the nature of the market demand curve compared to individual demand curves?

Flatter Signup and view all the answers

How do you obtain the market demand curve?

By horizontally summing individual demand curves Signup and view all the answers

What is the demand of consumer A at a price of k80?

5 units Signup and view all the answers

What is the demand of consumer B at a price of k60?

18 units Signup and view all the answers