ECON: Unit 2: Ch 4

Question 0

Demand

Answer 0

Desire to purchase an item at a specific price, time, with the ability and willingness to pay
Microeconomic concept
Central to what/how/ for whom process
2 variables: price and quantity of a specific process at a given point in time

Question 1

Symbols

Answer 1

P, price
D, demand
S, supply
Delta, change
Y, income
QD, quantity demanded
QS, quantity supplied

Question 2

Quantity

Answer 2

One specific point stating how many units are demanded At a specific price

Question 3

General demand

Answer 3

Serious of points stating how many units are demanded at various prices

Question 4

Demand schedule

Answer 4

Quantity of demand varies with price

Collected data in a table

Question 5

Demand curve

Answer 5

Line graph that shows amount of product that will be purchased at each price
Price on y axis, quantity demanded on x

Question 6

Ceteris paribus

Answer 6

All other things being equal
Can only change one factor at a time to see what will happen to supply and demand
Studying short term affects

Question 7

Law of demand

Answer 7

Quantity of demand varies inversely with its price

High demand, low price

Question 8

Market demand

Answer 8

Shows quantities demanded by everyone who is interested in purchasing the product

Question 9

Marginal utility

Answer 9

Extra usefulness or additional satisfaction a person gets from acquiring or using one more unit of a product

Question 10

Diminishing marginal utility

Answer 10

Principle at states that the extra satisfaction we get from using additional quantities of a product begins to decline

Question 11

Change in price…

Answer 11

Equal to change in quantity demanded

Question 12

Income effect

Answer 12

Change in QD because of change in price that alters consumers real income

Question 13

Substitution effect

Answer 13

Change in QD because of change in relative price of product

Question 14

Change in demand factors

Answer 14

• results in entirely new demand curve
• consumer income, consumer taste(ads, season), substitutes price change, complements price change, expectations of price, number of consumers

Question 15

Elasticity

Answer 15

The general measure of responsiveness, cause effect relationship
The extent to which a change in price causes a change in the quantity demanded

Question 16

Elastic

Answer 16

Change in price causes a larger change in quantity demanded

Question 17

Inelastic

Answer 17

Change In price is smaller than quantity demanded

Question 18

Unit elastic

Answer 18

Change in price causes proportional Change in quantity demanded

Question 19

Determinants of demand elasticity

Answer 19

Can the purchase be delayed? : can’t, inelastic…can, elastic (luxury)
Are adequate substitutes available? : yes, elastic…no, inelastic
Does the purchase use a large portion of income? Yes, elastic…no, inelastic
Is it durable? Yes, elastic…no, inelastic

Question 20

Coefficient method

Answer 20

Price elasticity = % change QD/%change in P 
0-0.99999 inelastic
1 unit elastic
>1 elastic
Ignore negatives

Question 21

Calculating percent changes

Answer 21

QDnew-QDold/QDold
Pricenew-price old/price old
%changeQD/%change price