Economics Demand Concepts Quiz

Questions and Answers

What is demand?

A change in the amount that consumers will buy because the purchasing power of their income changes

The willingness to buy a good or service and the ability to pay for it (correct)

A method of measuring elasticity by comparing total revenues

A listing of how much of an item an individual is willing to purchase at each price

What does the law of demand state?

A listing of how much of an item all consumers are willing to purchase at each price

Consumers will buy less as their income rises

When prices go down, quantity demanded increases, and when prices go up, quantity demanded decreases (correct)

The total income from selling products

What is a demand schedule?

A listing of how much of an item an individual is willing to purchase at each price

What is a market demand schedule?

A listing of how much of an item all consumers are willing to purchase at each price Signup and view all the answers

What does a demand curve graphically show?

The data from a demand schedule Signup and view all the answers

What is the law of diminishing marginal utility?

States that the marginal benefit of using each additional unit of a product during a given period of time will decline Signup and view all the answers

What is the income effect?

The change in the amount that consumers will buy because the purchasing power of their income changes Signup and view all the answers

What is the substitution effect?

A change in the amount that consumers will buy because they buy substitute goods instead Signup and view all the answers

What does a change in quantity demanded indicate?

An increase or decrease in the amount demanded because of change in price Signup and view all the answers

What occurs during a change in demand?

When something prompts consumers to buy different amounts at every price Signup and view all the answers

What are normal goods?

Goods that consumers demand more of when their incomes rise Signup and view all the answers

What are inferior goods?

Goods that consumers demand less of when their incomes rise Signup and view all the answers

What are substitutes?

Goods and services that can be used in place of each other Signup and view all the answers

What are complements?

Goods that are used together, so a rise in demand for one increases the demand for the other Signup and view all the answers

What is elasticity of demand?

A measure of how responsive consumers are to price changes Signup and view all the answers

What does elastic demand mean?

What demand is considered if quantity demanded changes significantly as price changes Signup and view all the answers

What does inelastic demand mean?

What demand is considered if quantity demanded changes little as price changes Signup and view all the answers

What does unit elastic demand mean?

What demand is considered when the percentage change in price and quantity are the same Signup and view all the answers

What is total revenue?

A company's income from selling its products Signup and view all the answers

What is the total revenue test?

A method of measuring elasticity by comparing total revenues Signup and view all the answers

Study Notes

Demand Concepts

Demand refers to the willingness and ability of consumers to purchase a good or service.
According to the law of demand, when prices decrease, the quantity demanded increases, while an increase in prices results in a decrease in quantity demanded.

Demand Schedules

A demand schedule illustrates the quantity of a good that an individual is willing to buy at various price points.
A market demand schedule aggregates the willingness to purchase of all consumers at each price level.

Demand Representation

A demand curve visually represents the data from a demand schedule, plotting price against quantity demanded.
A market demand curve serves the same function for a market demand schedule, aggregating data for all consumers.

Consumer Behavior Principles

The law of diminishing marginal utility indicates that the additional satisfaction from consuming each extra unit of a product diminishes over time.
The income effect describes how changes in purchasing power influence the quantity of goods consumers buy.
The substitution effect occurs when consumers opt for substitute goods in response to price changes, affecting demand.

Changes in Demand

A change in quantity demanded is a shift in the amount purchased resulting from price changes.
A change in demand occurs due to factors that prompt consumers to buy different amounts at every price level, influenced by elements beyond just price.

Goods Classification

Normal goods see increased demand when consumer incomes rise, while inferior goods experience decreased demand under the same circumstances.
Substitutes are goods that can replace each other, affecting demand dynamics.
Complements are goods used together, where an increase in demand for one boosts demand for the other.

Demand Elasticity

Elasticity of demand measures consumer responsiveness to price changes, categorized as:
- Elastic: demand significantly changes with price fluctuations.
- Inelastic: demand changes little despite price adjustments.
- Unit elastic: percentage change in price matches percentage change in quantity demanded.

Revenue Concepts

Total revenue is the income generated by a company from sales.
The total revenue test is a method for evaluating demand elasticity by analyzing changes in total revenue in response to price alterations.

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Description

Test your understanding of demand concepts including demand schedules and curves. Explore how consumer behavior influences market dynamics and the law of demand. This quiz aims to enhance your grasp of these fundamental economic principles.