Questions and Answers
What does the law of demand state?
Which factor causes a movement along the demand curve?
Change in the price of the good.
If apples and pears are substitutes, what happens when the price of pears increases?
Increase the demand for apples.
If canoes and paddles are complements, what happens when the price of canoes decreases?
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Over the past several years, consumer tastes for CDs have decreased. This means that the ________ for CDs has ________.
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When the price of printers goes down and the demand for printer ink goes up, what relationship do these goods have?
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If the price of hot dogs increases, what would likely happen to the demand for hot dog buns?
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If peanut butter and jelly are complements, what happens when the price of peanut butter goes up?
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What represents the inverse relationship between price and quantity demanded?
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What best describes the situation where Yeti sales have been decreasing and Orca sales increasing due to rising Yeti prices?
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What happens when the price of domestic automobiles increases?
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An increase in price causes a decrease in the demand for oil.
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Which would NOT cause a change in the demand for mopeds?
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A shift of the demand curve for Apple iPhones would not be caused by a change in what?
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Which would NOT cause a change in the demand for sailboats?
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If black beans and pinto beans are substitutes and the price of black beans decreases, what would occur?
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A decrease in price causes an increase in demand for airline tickets.
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Which would NOT cause a change in the demand for Honda Fits?
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What does the statement about Chromebooks and iPads indicate?
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When price changes, what happens on the graph?
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Study Notes
Law of Demand
- The law of demand indicates an inverse relationship between price and quantity demanded; as price decreases, quantity demanded increases.
Demand Curve Movement
- A change in the price of the good causes movement along the demand curve, affecting quantity demanded.
Substitute Goods
- If two goods are substitutes, an increase in the price of one will lead to an increase in demand for the other.
Complementary Goods
- A decrease in the price of a complement good (e.g., canoes) leads to an increase in demand for the other (e.g., paddles).
Consumer Preferences
- A decline in consumer tastes for a product (e.g., CDs) results in a decrease in demand for that product.
Price Relationship
- If the price of a good (e.g., printers) decreases, the demand for its complement (e.g., printer ink) generally increases.
Demand Impact from Price Increase
- An increase in the price of one good (e.g., hot dogs) typically leads to a decrease in the demand for related goods (e.g., hot dog buns).
Shifting Demand Curves
- For complementary goods, an increase in the price of one (e.g., peanut butter) results in a leftward shift of the demand curve for the other (e.g., jelly).
Demand Curve Representation
- The demand curve visually represents the inverse relationship between price and quantity demanded.
Market Dynamics
- Rising prices of a product (e.g., Yetis) may cause its sales to decrease, while making substitute products (e.g., Orcas) more appealing, leading to increased sales of the substitute.
Misinterpretation of Demand Changes
- An increase in price results in a decrease in quantity demanded, not a change in overall demand, as highlighted in the context of rising oil prices.
Factors Affecting Demand
- A price change of a good itself (e.g., mopeds, sailboats, Honda Fits) does not cause a shift in the demand curve for that good.
Effects of Price Decrease on Substitutes
- A significant decrease in the price of one substitute (e.g., black beans) will lead to a decrease in demand for its substitute (e.g., pinto beans).
Quantity Demanded vs. Demand
- A decrease in price results in an increase in quantity demanded, not an increase in demand, as seen in airline ticket pricing.
Understanding Movement on Graphs
- Changes in price result in movements along the demand curve; they do not cause shifts in the curve itself.
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Description
Test your knowledge on the law of demand and the factors affecting it with this quiz. It covers key concepts such as price changes and the relationship between substitutes. Perfect for Economics students looking to reinforce their understanding of demand.
