chapter 3 econ 101 Flashcards
What is a demand schedule? What is a demand curve?
A
demand schedule
is a table that shows the relationship between the price of a product and the quantity of the product demanded and a
demand curve
is a graph that shows the relationship between the price of a good and the quantity of the good demanded.
What do economists mean when they use the Latin expression ceteris paribus?
all else is equal
The law of demand is the assertion that
the quantity demanded of a product is inversely related to its price.
An increase in the price of a product causes a decrease in quantity demanded because of the income and substitution effects. More specifically,
the substitution effect is the decrease in quantity demanded because the product is more expensive relative to other goods and the income effect is the decrease in quantity demanded owing to the decline in consumers’ purchasing power.
From the list below, select the variable that will cause the demand curve to shift:
consumer income
For the following pair of products, state whether they are complements substitutes, or unrelated:
Oscar Mayer hot dogs and Wonder hot dog buns
State whether each of the following events will result in a movement along the demand curve for McDonald’s Quarter Pounder hamburgers or whether it will cause the curve to shift.
Part 2
a. The price of Burger King’s Whopper hamburger declines. This will cause
demand for McDonald’s Quarter Pounder hamburgers to decrease.
McDonald’s eliminates coupons for $1.00 off the purchase of a Quarter Pounder. This will cause
a movement along the demand curve for McDonald’s Quarter Pounder hamburgers. When McDonald’s eliminates $1.00 off coupons, this is effectively a price increase, resulting in a movement along the demand curve for a McDonald’s Quarter Pounder hamburger.
The price of fries increases due to a potato shortage. This will
Fries are a complement to McDonald’s Quarter Pounder hamburgers.
When the price of fries increases, the demand for McDonald’s Quarter Pounder hamburgers will decrease
. McDonald’s switches to using fresh, never-frozen beef patties in its Quarter Pounders. This will cause
If McDonald’s makes the switch to healthier/fresher ingredients, it would expect there to be an increase in the demand for Quarter Pounders (demand would shift to the right).
The Canadian economy enters a period of decline in incomes. This will cause
When income decreases, the demand for an inferior good increases. Since the Canadian economy enters a period of decline in incomes, the demand for McDonald’s Quarter Pounder hamburgers, an inferior good, will increase, that is shift to the right.
Question content area
Part 1
A student makes the following argument:
The chapter says that people in Ontario and other parts of Canada far from the ocean treat lobster as a normal good LOADING… . I can’t stand the stuff—they look like alien bugs and they take too much work to eat. For me, lobster is an inferior good LOADING… .
This student is confused because the classification of a good as normal or inferior depends on the response of demand to a change in income. A good is a normal good when demand increases following a rise in income and decreases following a fall in income. Similarly, a good is an inferior good when demand decreases following a rise in income and increases following a fall in income.
A normal good is one for which demand increases as consumer incomes rise and decreases as consumer incomes fall. If the demand for bottled water is negatively affected by a recession and declining incomes, it implies that it is a normal good because people are cutting back on their consumption of it when their incomes decrease.
The difference between a change in supply and a change in the quantity supplied is that the latter is
variables that influence demand
demand is determined by wants by consumer
