Questions and Answers
What are the characteristics of demand?
Desire, ability, and willingness
What is the combination of desire, ability, and willingness called?
Demand
What does a change in price cause in terms of quantity demanded?
Demand elasticity
What is the quantity demanded at each and every possible price that might prevail in the market at a given time?
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What is the rule stating that more will be demanded at lower prices and less at higher prices?
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What leads to a shift left or right in the demand curve?
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What is the relationship where an increase in the price of one reduces the demand for the other?
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What type of elasticity occurs when the percentage change in price causes a change in quantity demanded?
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What occurs when quantity demanded changes due to price changes that make products more or less costly?
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Changes in quantity demanded and changes in price have an _________ relationship.
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What is the income effect?
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Which would an economist consider a likely substitute for coffee?
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What is illustrated by a hungry man being willing to pay a high price for food, but not willing to pay the same price once he's no longer hungry?
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On a demand curve, movement as opposed to a shift is a result of what?
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Which would an economist consider a complement for coffee?
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What test do economists consider a complement for coffee?
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To estimate elasticity, compare the _________ of a price change to the _________ of the change in total revenue.
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Which product most likely has a demand that is inelastic?
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What does movement indicating that a different quantity is purchased in response to a change in price show?
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Study Notes
Characteristics of Demand
- Demand is characterized by desire, ability, and willingness.
Demand Definition
- Demand is the combination of desire, ability, and willingness to buy goods.
Demand Elasticity
- Refers to how a change in price influences the quantity demanded.
Demand Curve
- Represents the quantity demanded at various price points in the market at a specific time.
Law of Demand
- States that as prices decrease, the quantity demanded increases, and vice versa.
Change in Demand
- Shifts in consumer demand result in the demand curve moving left (decrease) or right (increase) at all price levels.
Compliments
- Products where an increase in the price of one results in a decrease in demand for the other.
Inelastic Demand
- Describes a situation where percentage change in price leads to a smaller percentage change in quantity demanded.
Substitution Effect
- The change in quantity demanded resulting from a price change that makes a product more or less attractive compared to alternatives.
Inverse Relationship
- There is an inverse relationship between quantity demanded and changes in price; as one increases, the other decreases.
Income Effect
- Refers to the change in demand resulting from a change in consumers' income levels.
Substitute Goods
- Tea is considered a likely substitute for coffee from an economist's perspective.
Diminishing Marginal Utility
- Describes the phenomenon where a consumer's willingness to pay decreases after satisfying an initial need, such as hunger.
Demand Curve Movement vs. Shift
- Movement along a demand curve is caused by a change in price, while shifts in the curve result from other changing factors.
Complement Goods
- Donuts are a recognized complement for coffee, indicating they are often consumed together.
Total Expenditure Test
- Economists assess demand complements based on total expenditure patterns on products.
Estimating Elasticity
- To determine price elasticity, compare the direction of a price change to the resulting change in total revenue.
Inelastic Product Example
- Vidal medicine is cited as a product likely to have inelastic demand.
Change in Quantity Demanded
- Movement indicating a different quantity purchased in response to a change in price, distinct from a shift in demand.
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Description
Test your knowledge with these flashcards on demand in economics. You'll explore important concepts including the characteristics of demand, demand elasticity, and the relationship between price and quantity demanded. Perfect for students preparing for their economics exams.
