2.2-Demand Flashcards
What is demand in microeconomics?
Demand refers to the quantity of a good or service that consumers are willing and able to purchase at various prices.
True or False: Demand always increases with an increase in price.
False
What is the law of demand?
The law of demand states that, all else being equal, as the price of a good decreases, the quantity demanded increases, and vice versa.
What does a demand curve represent?
A demand curve represents the relationship between the price of a good and the quantity demanded over a given period.
Fill in the blank: The demand curve typically slopes ________ from left to right.
downward
What factors can lead to a shift in the demand curve?
Factors include changes in consumer income, tastes and preferences, prices of related goods, and expectations about future prices.
What is the difference between a change in demand and a change in quantity demanded?
A change in demand refers to a shift of the demand curve, while a change in quantity demanded refers to a movement along the curve due to a change in price.
Multiple Choice: Which of the following would likely increase demand for a normal good?
An increase in consumer income.
True or False: An increase in the price of a substitute good will decrease the demand for the original good.
False
What is a normal good?
A normal good is one for which demand increases as consumer income rises.
What is an inferior good?
An inferior good is one for which demand decreases as consumer income rises.
Fill in the blank: If the price of a complementary good decreases, the demand for the original good will ________.
increase
What role do consumer preferences play in demand?
Consumer preferences determine the desirability of goods and services, influencing demand levels.
Multiple Choice: Which of the following is NOT a determinant of demand?
Changes in production technology.
What is the concept of elasticity of demand?
Elasticity of demand measures how much the quantity demanded of a good responds to a change in price.
True or False: If demand is elastic, a price increase will lead to a proportionately larger decrease in quantity demanded.
True
What is unitary elasticity?
Unitary elasticity occurs when a percentage change in price results in an equal percentage change in quantity demanded.
Fill in the blank: The demand for necessities tends to be ________ elastic.
inelastic
What is the relationship between total revenue and elastic demand?
For elastic demand, an increase in price will decrease total revenue, while a decrease in price will increase total revenue.
What is the effect of consumer expectations on demand?
If consumers expect prices to rise in the future, current demand may increase.
Multiple Choice: Which factor does NOT directly affect demand?
Supply levels.
What is a Giffen good?
A Giffen good is a type of inferior good for which demand increases as the price increases, violating the law of demand.
True or False: Advertising can shift the demand curve to the right.
True
What does it mean if demand is perfectly inelastic?
Perfectly inelastic demand means that quantity demanded does not change regardless of price changes.
