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What does the term "demand" mean/ refer to?
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ECON DMND CRDS 2022
Mr. Stickler's Liberty Christian ECON. Demand Flashcards 2022
| Question | Answer |
|---|---|
| What does the term "demand" mean/ refer to? | This term refers to "the desire, ability, and willingness to buy a product". (Pg. 91) |
| What does the term "microeconomics" mean/ refer to? | This term refers to "the part of economic theory that deals with behavior & decision making by individual units, such as people and firms. (Pg. 91) |
| What does the Law of Demand state? | This states that the quantity demanded is inversely related with its price. In other words, when price goes up, quantity demanded goes down (& vice versa). (Pg. 93) |
| What does the term "Marginal Utility" mean/ refer to? | This term refers to "the extra usefulness or additional satisfaction a person gets from acquiring or using one more unit of a product". (Pg. 95) |
| What does the term "Diminishing Marginal Utility" mean/ refer to? | This term refers to "the principle which states that the extra satisfaction we get from using additional quantities of a product begin to decline." (Pg. 95) |
| Give an example of how "Diminishing Marginal Utility" works. | One example of this would be if you buy a drink when you are thirsty. Once you buy the first drink, you aren't as thirsty anymore, so you won't be as satisfied with your purchase if you buy a 2nd or 3rd drink. (Pg. 95) |
| What is the Income Effect? | This happens when there is a change in the quantity demanded because of a change in price that alters consumers' real income. (Pg. 98) |
| What is the Substitution Effect? | This is "the change in quantity demanded because of the change in the relative price of the product, which causes the consumer to purchase a lower - priced substitute product." (Pg. 98) |
| List the six (6) things that can result in a change in demand. | 1.) Consumer income; 2.) Consumer Tastes; 3.) Substitutes; 4.) Complements; 5.) Expectations; 6.) Number of Consumers. (Pgs. 99 - 101) |
| What are "substitutes" (where economics is concerned)? | These are products that can be used in place of other products. for example, Honda cars can be substitutes for Fords if the price of Ford vehicles goes up. (Pg. 100) |
| What are "complements" (where economics is concerned)? | These are products whose use increases the use of another, related product. (Example: ketchup. People don't eat ketchup by itself, but when it is served with french fries, people will use both products.) (Pg. 101) |
| What does the term "elasticity" mean/ refer to? | This term refers to "a general measure of responsiveness . . . it tells us how a dependent variable, such as quantity demanded, responds to a change in the independent variable, such as price." (Pg. 103) |
| When we compute the elasticity of demand, what are we trying to find out? | When we compute this, we are trying to find out whether price changes will effect the quantity of products that consumers will demand. |
| What does the term "elastic" mean where "elasticity of demand" problems are concerned? | This term means that for every 1% that we increase a product's price, there will be a larger than 1% decrease in the quantity demanded. |
| What does the term "inelastic" mean where "elasticity of demand" problems are concerned? | This term means that for every 1% that we increase a product's price, there will be a less than 1% decrease in the quantity demanded. |
| When there is a "change in demand", which way does the "demand curve" move on the chart? Which way does it move when there is a "change in quantity demanded"? | When there is a "change in demand", the curve can move to the right. When there is a "change in quantity demanded", there is a movement along the original demand curve. (Pg. 99) |
| What happens (per the Law of Demand) when the price of a good/service rises? | When this happens, consumers look for substitutes (i.e. fewer consumers will continue to buy the good/service at the higher price). |
| What is the relationship between the "demand schedule" and the "demand curve"? | The "demand curve" is a graphical representation of the information given in a "demand schedule". |
| What is the definition of a "Market Economy"? | In this type of economy, ". . . people and firms act in their own best interests to answer the basic WHAT, HOW, and FOR WHOM questions". (Pg. 92) |
| What is the difference between an "Individual Demand Curve" and a "Market Demand Curve"? | "Individual Demand Curves" is a graph that shows "the quantity demanded at each and every price that might prevail in the market. "Market Demand Curves" show "the quantities demanded by everyone who is interested in purchasing the product". (Pgs. 93 & 94) |
| Although people buy more of a product when the seller lowers the price, some items such as luxury goods are not offered at a lower price. What principle from our first unit helps explain why this happens? | The "Diamonds and Water Paradox" helps explain this. Luxury goods are both rare and useful. Because they are (typically) rare, they fall under this principle. |
| What three (3) questions can we ask ourselves that will help us determine a product's "demand elasticity"? | 1.) Can the Purchase be Delayed? (If it can, it is usually "inelastic") 2.) Are Adaquate Substitutes Available? (If there are, it is usually "elastic") 3.) Does the Purchase Use a Large Portion of Income? (If it does, it tends to be "elastic".) (107-109) |
| What did we learn about "price ceilings" when we did our "Handshake Market" activity? | We learned that consumers are harmed because there will be a scarcity of desired products and that producers are harmed because they struggle to break even, let alone make a profit. |
| When using linear equations with "demand" data, what does the "a" variable tell us? | This variable is the "Q intercept". It tells us how many products will be demanded by consumers if the price is $0. (Also called "autonomous demand".) |
| Why is the "b" variable always negative when we use linear equations with "demand" data? | This variable is always "negative" because it represents the "Law of Demand". |
| When we calculated the equilibrium price and quantity for Xbox One's vs. PS4's, we learned that there was a $100 difference in price. What would this have told us about consumer buying habits had we known this when they were both first released? | We could have used the Law of Demand - that consumers will buy more at lower prices and fewer at higher prices - along with the idea of "substitution" - to predict that more PS4's would be sold than Xbox One's. |
| What did we learn about unregulated markets when we did our "Handshake Market" activity in class? | We learned that, in an unregulated market, after some time, the market will regulate itself and an equilibrium price and quantity will become apparent to both producers and consumers. |
| What did we learn about demand for a good when the price of a "substitute" is lowered when we did our "Handshake Market" activity in class? | We learned that demand for the higher priced good will decrease dramatically when the price of a "substitute" is lowered. |
| What did we learn about demand for a good when state or national government adds a tax to a good? | We learned that many producers will not be able to afford to stay in business, so there will be a scarcity for the good when this happens. |
| What 3 things can we ask ourselves that will help us determine the "demand elasticity" of a product or service? | 1. Can the purchase be delayed?; 2. Are adequate substitutes available?, 3. Does the purchase use a large portion of (a person's) income? |
| What is the difference between a change in "quantity demanded" and a change in "demand"? | A change in quantity demanded is a change in a single quantity due to a change in price; a change in demand is a change in all quantities that are demanded at all possible prices. |
| What does the term "Change in demand" mean/ refer to? | This term refers to a change in the amount of a product that consumers are demanding for a reason other than a price change. |
| What does the term "demand curve" mean/ refer to? | This term refers to "a graph showing the quantity demanded at each and every price that might prevail in the market at any given time". |
| What are "utils"? | These are hypothetical units of measurement for utility that are used by economists to present hypothetical information about utility and consumer demand theory. |
| What does the term "demand schedule" mean/ refer to? | This term refers to the "chart that shows the various quantities demanded of a particular product at all prices that might prevail in the market at a given time". |
| What does the term "consumer demand theory" mean/ refer to? | This term refers to "an observation of the way individuals act to divide their limited resources among the commodities that provide them with satisfaction". |
| How do we determine whether prices for a product or service are "demand elastic", "demand inelastic", or "unit elastic"? | When we calculate the price elasticity of demand, if the answer is greater than 1 it is "demand elastic", if it is less than 1 it is "demand inelastic", and if the answer is 1 it is "unit elastic". |
| When we calculate the "P - intercept", what does this number tell us? | This number tells us the maximum amount that consumers are willing to pay for a particular good or service in a market. |
| What does the b variable represent in a linear demand equation? | This variable represents elasticity. It will always be negative due to the law of demand. |
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