Podcast
Questions and Answers
Which scenario best illustrates the law of demand?
Which scenario best illustrates the law of demand?
- A tech company releases a new smartphone model, and demand increases regardless of the price.
- A popular clothing brand maintains steady sales even after raising prices due to increased production costs.
- A local bakery increases the price of its bread, and consumers buy less bread.
- A coffee shop reduces the price of its coffee, and consumers purchase more coffee. (correct)
How would consumer behavior likely shift if the price of coffee increases significantly, assuming tea is a readily available and cheaper substitute?
How would consumer behavior likely shift if the price of coffee increases significantly, assuming tea is a readily available and cheaper substitute?
- Demand for both coffee and tea will decrease.
- Demand for coffee will increase as consumers seek a more stimulating beverage.
- Demand for coffee will decrease, while demand for tea will likely increase. (correct)
- There will be no noticeable change in the demand for either coffee or tea.
An economist is creating a market demand schedule for a new brand of energy drink. What is the primary goal of creating this schedule?
An economist is creating a market demand schedule for a new brand of energy drink. What is the primary goal of creating this schedule?
- To determine the most effective advertising strategies for the energy drink.
- To understand how consumer purchasing habits will evolve as the price of the energy drink changes. (correct)
- To identify the demographic most likely to purchase the energy drink.
- To set the initial production quota for the energy drink.
What does the term 'ceteris paribus' signify in the context of economic analysis?
What does the term 'ceteris paribus' signify in the context of economic analysis?
If consumers suddenly expect the price of gasoline to rise significantly next week, how is their current demand for gasoline likely to change?
If consumers suddenly expect the price of gasoline to rise significantly next week, how is their current demand for gasoline likely to change?
How would a marketing campaign designed to create a new fashion trend most likely influence the demand curve for the advertised clothing?
How would a marketing campaign designed to create a new fashion trend most likely influence the demand curve for the advertised clothing?
A family earns more income and decides to purchase fewer instant noodles and more fresh vegetables. What type of good are instant noodles in this scenario?
A family earns more income and decides to purchase fewer instant noodles and more fresh vegetables. What type of good are instant noodles in this scenario?
If a pharmaceutical company increases the price of a life-saving medicine and observes very little change in the quantity demanded, what does this suggest about the demand for this medicine?
If a pharmaceutical company increases the price of a life-saving medicine and observes very little change in the quantity demanded, what does this suggest about the demand for this medicine?
A company is considering raising the price of its product. If demand for the product is elastic, what is the likely impact on the company's total revenue?
A company is considering raising the price of its product. If demand for the product is elastic, what is the likely impact on the company's total revenue?
What is the most direct effect of advances in technology on the supply of goods and services?
What is the most direct effect of advances in technology on the supply of goods and services?
Flashcards
What is Demand?
What is Demand?
Desire to own something and ability to pay.
Law of Demand
Law of Demand
People buy more when price falls, less when it rises.
Substitution Effect
Substitution Effect
Consuming more of one good due to price increase of another.
Market Demand Schedule
Market Demand Schedule
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Demand Curve
Demand Curve
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Ceteris Paribus
Ceteris Paribus
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Substitutes
Substitutes
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Compliments
Compliments
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Inelastic
Inelastic
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Law of Supply
Law of Supply
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Study Notes
- Demand is being willing and able to buy goods at a specific price.
- The Law of Demand states people buy more when prices fall and less when prices rise.
- Substitution effects are demonstrated when an increase in Coca-Cola's price leads to increased demand for Pepsi.
- Economists create market demand schedules to predict how buying habits change with price changes.
- A demand curve graphically represents a demand schedule.
- "Ceteris Paribus" means all factors other than price remain constant.
- Consumer expectations shift the demand curve: anticipating a price increase for a good will cause immediate demand for it.
- Demographics include population characteristics like age, race, gender, and occupation.
- Advertising shifts the demand curve by creating fads and trends.
- An increase in rent leading to decreased spending on other items indicates those goods are normal goods.
- Switching from cheap instant noodles to fancy pasta after a raise suggests instant noodles are inferior goods.
- Elasticity of demand measures how consumers respond to price changes.
- Milk and medicine are examples of inelastic goods.
- Cow's milk is considered inelastic as it's a necessity without substitutes.
- Elasticity affects pricing by showing that for elastic goods, a price increase reduces total revenue.
- If a firm knows that the demand for its product is elastic at the current price, it knows that an increase in price would decrease total revenue
- The law of supply states as prices increase, the quantity supplied will increase.
- A paper plate factory producing more plates when prices increase demonstrates the law of supply.
- If the price of home computers rises, the computer makers will make more computers
- A supply schedule shows how much a supplier offers at different prices.
- Supply is upward sloping while demand is downward sloping.
- If Ruth's bread supply is highly elastic, when the price of bread falls, cut costs by hiring fewer workers
- Fixed costs do not change like rent.
- Variable costs rise or fall depending on the quantity produced.
- Marginal cost is the added cost of producing one more unit.
- Profit is calculated as total revenue minus total cost.
- A factory losing money will continue to operate if total revenue is still greater than its total cost.
- Increased resource costs decrease supply because the good becomes more expensive to produce.
- Advances in technology lower production costs and increase supply.
- A subsidy is a government payment that subsidies farmers to keep food supply up
- When the government causes the supply of a good to rise, the supply curve shifts to the right
- High global demand for fuel impacts changes in supply.
- Equilibrium is the point where demand equals supply; the market is stable.
- Both buyers and sellers benefit when a market is at equilibrium.
- Draw an equilibrium that shows the supply and demand for an item, equilibrium price and quantity
- Show increase or decrease in demand or supply
- Demand is the desire to own something and the ability to pay for it
- Substitution Effect: Consuming Less of a good and more of another as a reaction to a price increase
- A market demand schedule is a table listing the quantity of a good that all consumers will buy at various prices
- Substitutes are goods used in place of each other (e.g., Coke/Pepsi).
- Complements are two goods bought and used together, like PlayStations and PlayStation Games.
- Normal goods are goods for which demand falls as income increases
- Inferior goods are goods for which demand falls as income increases
- Demographics are the characteristics of populations, such as age, race, gender and occupation
- Substitutes are goods that are used in place of each other (coke/pepsi)
- Compliments are two goods that are bought and used together (Playstation and Playstation Games)
- Elastic is very sensitive to price changes
- Inelastic When demand does not change much after a price change (milk/medicine)
- Unitary Elastic if ED = 1
- A company's total Revenue is the amount of money the company receives from selling its goods
- Law of Supply States that as prices increase, so will the quantity supplied
- Supply Schedule is a chart that tells how much a supplier will offer at different prices
- Fixed cost costs that do not change
- Variable costs Rise or fall depend on the quantity produces
- Regulation Law that tells how a good must be made
- Non price factors cause demand to fall, the demand curve shifts to the left but an increase in demand appears as a shift to the right.
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