Ch 3: Demand and supply model

Question 1

Demand

Answer 1

willingness/ability of buyers to purchase different quantities of a good at different prices

Refers to ENTIRE relationship between prices and quantity demanded

Question 2

Demand Schedule

Answer 2

a table

Question 3

Demand Curve

Answer 3

graph representation

Question 4

Demand Equation

Answer 4

Qd = a - bP

Qd= quantity demanded
a = factors influencing demand besides price
b = slope
P = price

Question 5

Quantity Demanded

Answer 5

amount of the good that individual is willing to buy at particular price

Question 6

Law of Demand

Answer 6

as price increases, quantity demanded decreases
(all other conditions held constant)

Question 7

Change in quantity demanded

Answer 7

change of the point on the line

Question 8

change in demand

Answer 8

shift of entire demand curve

Question 9

factors that shift the curve

Answer 9

-Changes in income
-Changes in prices of related goods
-Changes in preferences
-Changes in future price expectations

Question 10

Normal Goods

Answer 10

when income increases, demand increases

Question 11

Inferior Good

Answer 11

when income increases, demand decreases

Question 12

Substitutes

Answer 12

decrease in price of one causes decrease in demand for the other

Question 13

Complements

Answer 13

decrease in price of one causes increase in demand for other