Chapter 7: Demand Flashcards
What is demand?
The willingness and ability to buy a product
Fill in the blank:
A rise in price will lead to a _____ in demand.
A fall in price will lead to a ____ in demand.
fall, rise
True or false?
As price rises, the willingness and ability to buy a product falls
True
What is market demand?
It is the total demand for a product
What is individual demand?
It is the amount of a product an individual is willing and able to buy at different prices.
What is aggregation?
It is the addition of individual components to arrive at a total amount
What does a demand schedule list?
It lists the different quantities demanded of a product at different prices
In a demand curve, what is measured on the vertical axis?
The price of the product
In a demand curve, what is measured on the horizontal axis?
The quantity demanded of the product
Is the demand curve downwards or upwards?
Downwards
(TIP: You can remember this by knowing that demand starts with a “D”, like dirt or downwards)
To save time, economists will draw the demand curve as a straight line to make it more clear. Is it still referred to as a curve?
Yes
A movement along the demand curve is due to what?
A change in price
What is an extension in demand?
It is a rise in the quantity demanded due to a fall in price of the product itself.
How would an extension in demand look on a graph(would the point move up or down?)
It would move down
How would a contraction in demand look on a graph(would the point move up or down?)
It would move up
List as many conditions of demand you can
Season, change in income, change in the price of a complement, change in the price of substitute, change in population, advertising, and change in taste and fashion.
When it is summer, does the demand for ice cream increase or decrease? Will the curve shift left or right?
The demand will increase and the curve will shift right
When it is winter, does the demand for ice cream increase or decrease? Will the curve shift left or right?
The demand will decrease and the curve will shift left
What are normal goods?
They are goods whose demand increases as income increases
What are inferior goods?
They are goods whose demand decreases as income increases
What are example of normal and inferior goods(make sure they are related)
Normal good: Sportscar
Inferior good: Old, cheap, and used car
True or false?
As income increases for consumers, they will purchase normal goods instead of inferior goods
True
When the income of consumers increases… (Where will the demand curve shift?)
The demand curve will shift right
When the income of consumers decreases… (Where will the demand curve shift?)
The demand curve will shift left
What is a substitute?
It is a product that can be used to replace another product
Pepsi and Coca-Cola are substitutes. Let’s say they are each $4 for one can. If the price will increase for Pepsi from $4 to $6…
Answer each question:
a) What will happen to the demand for Coca-Cola, and where will the demand curve shift?
b) Is Pepsi increasing its price an extension or contraction in demand?
c) Does the demand curve for Pepsi shift? If so, where will it shift?
a) The demand for Coca-Cola will increase and the curve will shift right
b)Contraction in demand
c) No, a change in price is a movement along the curve
What is a complement?
It is a product that relies on another product(it used together with another product)
What is an example of two products that rely on each other?
Cereal and milk
Milk and coffee
Printers and ink
Whiteboards and markers
Game consoles and video game CDs
Smartphones and covers
Hot dogs and hot dog buns
Bread and butter
Laptops and laptop cases
Peanut butter and jelly
Cars and gas
Toothbrush and toothpaste
Fries and ketchup
Cereal and milk rely on each other. If the price of cereal increases, what happens to both of the products?
For cereal, there will be a contraction in demand, but there will be no shifting.
For milk, the curve will shift left because there is less demand for cereal and, therefore less demand for milk. There was no change in the price of milk, but the demand decreased, so it shifted left.
If firms spend more money on advertising, will the curve shift left or right?
Right
If the population decreases, will the curve shift left or right?
left
If a product becomes more trendy and popular, will the curve shift left or right?
right
