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Econ Chapter 4
| Question | Answer |
|---|---|
| the sum of all the demand in the economy | aggregate demand |
| states that when the price of a good or service goes down, quantity demanded increases, and when the prices go up, quantity demanded falls | law of demand |
| is a listing of how much of an item an individual is willing to purchase at each price. | Demand schedule |
| states that when prices go down, quantity demanded increases. When prices go up, quantity demanded decreases. | Law of demand |
| is the willing- ness to buy a good or service and the ability to pay for it. | Demand |
| is a listing of how much of an item all consumers are willing to purchase at each price. | Market demand schedule |
| a graph that shows a demand schedule, or how much of a good or service an individual is willing and able to purchase at each price | demand curve |
| a graph that shows data from a market demand schedule, or how much of a good or service all consumers are willing and able to purchase at each price | market demand curve |
| states that the marginal benefit from using each additional unit of a good or service during a given time period tends to decline as each is used | law of diminishing marginal utility |
| a change in the amount of a good or service a consumer will buy because his or her income (and therefore purchasing power) changes | income effect |
| the pattern of behavior that occurs when consumers react to a change in price of a product by buying a substitute product that offers a better relative value | substitution effect |
| a change in the amount of a product that consumers will buy because of a change in price | change in quantity demanded |
| a situation in which a change in the marketplace prompts consumers to buy different amounts of a good or service at every price | change in demand |
| goods that consumers demand more of when their incomes rise | normal goods |
| goods that consumers demand less of when their incomes rise | inferior goods |
| products that can be used in place of other products to satisfy consumer wants | substitutes |
| products that are used together, so the increase or decrease in demand for one will result in an increase or decrease in demand for the other | complements |
| a measure of how responsive consumers are to price changes in the marketplace | elasticity of demand |
| referring to a situation in which a change in price, either up or down, leads to a relatively larger change in the quantity demanded or the quantity supplied | elastic |
| a situation in which quantity demanded or quantity supplied changes little as price changes | inelastic |
| relating to a situation in which the percentage change in price and quantity demanded are the same | unit elastic |
| the income a business receives from selling its products | total revenue |
| a method of measuring elasticity by comparing the total revenue a business would receive when offering its product at various prices | total revenue test |
| What two factors are necessary for demand? | desire for a good or service and the ability to pay for it |
| According to the law of demand, what happens when prices go down? | Quantity demanded increases. |
| According to the law of demand, what is the relationship between quantity demanded and price? | an inverse relationship |
| What do business owners use to gather information for market demand schedules? | market research |
| What is a market demand schedule? | a table showing how much of a product a market will buy |
| What is a market demand curve? | a graph showing how much of a product a market is willing and able to buy |
| What assumption is used when making demand curves? | All economic factors remain constant except price. |
| What term is defined as the change in the amount consumers will buy because they can buy a different product instead? | substitution effect |
| What explains the shape of a demand curve? | the law of diminishing marginal utility |
| A factory closes, laying off hundreds of workers, and consumer spending in the town falls. What factor is affecting demand? | income |
| When you are hungry, you receive the most satisfaction from the first apple and less satisfaction from each additional apple. What explains this? | law of diminishing marginal utility |
| What do various points on a demand curve represent? | change in quantity demanded |
| Many U.S. consumers have switched to wireless phones from traditional telephones. Which factor is affecting demand? | substitutes |
| As sales of digital cameras increase, so do sales of photo printers. What factor is affecting demand? | complements |
| What are products that consumers demand less of when their incomes rise? | inferior goods |
| Which economic concept is defined as the measure of how responsive consumers are to price change? | elasticity of demand |
| If quantity demanded does not change significantly when price changes, how is demand described? | inelastic |
| When demand is elastic, how does the percentage change in quantity demanded compare to the percentage change in price? | The percentage change in quantity demanded is greater |
| What does an inelastic demand curve look like? | steep slope |
| What does a demand curve look like when demand is unit elastic? | horizontal line |
| Why doesn't the electric company ever offer sale prices? | Electricity is a necessity, so demand is inelastic. |
| How is total revenue calculated? | multiplying price by quantity sold |
| What is the method used to measure theelasticity of demand? | total revenue test |
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