Questions and Answers
Which of the following would cause a change in the quantity demanded for a product?
The demand curve is always downward sloping.
True
What is the relationship between the change in price and total expenditures for an elastic demand curve?
Inverse
What term describes the demand for milk if a company decreases the price and total revenues fall significantly?
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How does the demand curve show an increase in demand?
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What does the Law of Demand state?
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Which of the following illustrates elastic demand?
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Buying only one drink instead of two drinks at lunchtime describes what concept?
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What does the demand curve show?
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What can cause the market demand curve to shift?
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How does a change in the price of a good affect its complement?
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If a consumer cannot postpone the purchase of a product, how does this affect demand?
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How are total expenditures determined?
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Which of the following is an example of substitutes?
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What is the main difference between the individual demand curve and the market demand curve?
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What does demand elasticity refer to?
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What is the income effect?
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What is demand?
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What describes demand when a given change in price causes a proportional change in the quantity demanded?
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What describes demand when a given change in price causes a relatively larger change in the quantity demanded?
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What is elasticity?
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What is a demand curve?
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What is marginal utility?
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What are complements?
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What illustrates a change in quantity demanded?
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What is microeconomics?
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What is the substitution effect?
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What describes substitutes?
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What describes demand when a given change in price causes a relatively smaller change in the quantity demanded?
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What determines who is in the market demand curve?
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Study Notes
Demand Fundamentals
- A decrease in price leads to a change in quantity demanded for a product.
- Demand curves are consistently downward sloping, indicating an inverse relationship between price and quantity demanded.
- The Law of Demand states that more of a product will be purchased at lower prices compared to higher prices.
Elasticity of Demand
- For elastic demand, total expenditures decrease when prices rise and increase when prices fall.
- Milk has been identified as inelastic when a price drop leads to falling total revenues.
- Demand elasticity measures the sensitivity of quantity demanded to price changes.
- Inelastic demand means that a price increase leads to a smaller decrease in quantity demanded.
Demand Shift Factors
- An increase in demand is represented by a rightward shift of the demand curve.
- Market demand curves can shift due to changes in the number of consumers.
- Changes in the price of a product can affect the demand for its complementary goods—typically, a price increase leads to lower demand for complementary products.
Marginal Utility and Demand
- Diminishing marginal utility explains why consumers may buy less of a product as they acquire more units.
- Demand is characterized by desire, ability, and willingness to purchase a product.
Consumer Behavior Concepts
- Substitution effect describes changes in quantity demanded due to relative price shifts.
- Complements are goods that complement the use of other products.
- Substitutes are alternatives that can replace a product.
Microeconomics Overview
- Microeconomics examines the behavior and decision-making of individual units such as consumers and firms.
- Individual demand curves differ from market demand curves, which reflect the total demand across all consumers.
Calculating Demand
- Total expenditures result from multiplying the product’s price by the quantity demanded.
- Unit elastic demand describes a proportional change in quantity demanded due to price changes.
- Elastic demand indicates a sizable change in quantity demanded in response to price changes.
Demand Curve Characteristics
- The demand curve visually represents the quantity demanded for various prices.
- Movements along the demand curve illustrate changes in quantity demanded due to price alterations.
Key Terms
- Income effect: Change in quantity demanded based on changes in consumers' real purchasing power.
- Marginal utility: Additional satisfaction gained from using one more unit of a product.
- Elasticity: Measurement of how demand changes in response to price variations.
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Description
Test your knowledge with these flashcards from Economics Chapter 4. Focus on key concepts such as demand curves, elasticity, and factors affecting quantity demanded. Perfect for studying for your upcoming economics exam!
