Questions and Answers
The law of demand states that a higher price leads to a ________ quantity demanded and that a lower price leads to a ________ quantity demanded.
Lower, Higher
What is demand?
The amount of some good or service that consumers are willing and able to purchase at each price.
Does a rise in price of a good or service decrease or increase the quantity demanded?
What is known as the inverse relationship between price and quantity demanded?
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On a demand schedule chart, when you're only changing price are you changing quantity demanded or demand?
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If the demand changes, would the curve shift or would it move all together?
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If the quantity demanded changes, would the curve shift or move all together?
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A change in price always causes a change in quantity demanded.
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Movement along the curve means a change in 'quantity demanded'.
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Demand is a shift along the demand curve.
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A change of a non-price variable always causes a change in demand.
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A price floor will lead to a _________, because no one will buy it.
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A price ceiling will lead to a __________ because price will be so low that everyone will buy it, leaving less of the product.
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What does elasticity measure?
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Things that are inelastic are things that are needed no matter the price and have no substitutes, like what?
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What is the elasticity of demand coefficient?
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Study Notes
Law of Demand
- Higher price results in lower quantity demanded; lower price results in higher quantity demanded.
- Inverse relationship between price and quantity demanded is referred to as the Law of Demand.
Demand Definition
- Demand refers to the amount of a good or service consumers are willing and able to purchase at various prices.
Quantity Demanded Changes
- A rise in the price of a good or service leads to a decrease in quantity demanded.
- Changes in price cause quantity demanded to change, not demand itself.
Demand Schedule and Curve
- Only changing price affects quantity demanded; demand remains unchanged.
- If demand changes due to non-price factors, the demand curve shifts.
- A movement along the curve indicates a change in quantity demanded.
Demand Shifts vs. Movement
- A change in quantity demanded results in the entire curve moving to a new position.
- A change due to non-price factors causes the curve to shift in its entirety.
Price Regulations
- A price floor leads to a surplus, as it sets a minimum price above equilibrium, causing excess supply.
- A price ceiling leads to a shortage, as it establishes a maximum price below equilibrium, increasing demand but decreasing supply.
Elasticity of Demand
- Elasticity measures how sensitive the quantity demanded is to price changes.
- Inelastic goods, such as gasoline, remain in demand regardless of price and lack substitutes.
Elasticity of Demand Coefficient
- Calculated as the percentage change in quantity demanded divided by the percentage change in price.
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Description
Test your understanding of the Law of Demand and its implications on consumer behavior. This quiz covers key concepts like demand definition, quantity demanded changes, and the distinction between demand shifts and movements along the demand curve. Perfect for anyone studying economics!
