econ_2106_20120707202533 / Marie Smith

Question 1

What is demand?

Answer 1

Demand determines the quantity of a good or service that people want to purchase in a given amount of time.

Question 2

What is supply?

Answer 2

Supply determines the quantity of a good or service that businesses are willing to sell in a given amount of time.

Question 3

Demand refers to whose behavior in the market?

Answer 3

Demand reffers to the behavior of consumers in the market.

Question 4

Supply refers to whose behavior?

Answer 4

Supply refers to the behavior of producers.

Question 5

What are the determinants of demand?

Answer 5

The determinants of demand for a product are: the price of the good, the price of substitute goods, the price of complementary goods, tastes and preferences, a consumers income, and expectations about the future.

Question 6

What is the demand function?

Answer 6

Mathematical relationship that predicts the quantity of a good demanded as a function of each of the factors that influence consumer behavior.

Question 7

How is the demand function written?

Answer 7

The demand function is a list of all the demand determinants using symbols.

Question 8

What is the law of demand?

Answer 8

The law of demand is an observation that the quantity demanded of most goods and services exhibits an inverse relationship with it’s price. When price increases the quantity purchased generally decreases. When the price decreases, the quantity demanded increases.

Question 9

How does a change in the price of a complement affect demand for a good?

Answer 9

A change in the price of a complement causes demand to change in the opposite direction.

Question 10

How does a change in the price of a substitute affect demand for a good?

Answer 10

A change in the price of a substitute causes demand for the original good to change in the same direction.

Question 11

How does an increase in income affect demand for a normal good?

Answer 11

An increase in income increases demand for a normal good.

Question 12

How does an increase in income affect demand for an inferior good?

Answer 12

An increase in income decreases demand for an inferior good.

Question 13

How is demand for a good affected when tastes or preferences change?

Answer 13

If tastes or preferences for a good change, demand for that product change in the same direction.

Question 14

How do expectations about future prices affect demand for a good?

Answer 14

Expectations about future prices cause demand in the present to change in the opposite direction from the expectation.

Question 15

What is the demand curve?

Answer 15

The demand curve is the graphical relationship between the price of a good and the quantity demanded, ceteris paribus.

Question 16

Which way does the demand curve slope?

Answer 16

A demand curve is downward sloping, as the price of a good falls, the quantity demanded increases and as the price of a good increases, the quantity demanded decreases.

Question 17

What is the substitution effect?

Answer 17

Consumers purchase more substitute goods when the price of a good increases.

Question 18

What is the income effect?

Answer 18

Consumers purchase less of the good when it’s price increases due to decreasing wealth.

Question 19

When the price of a good increases but income stays the same what happens to the consumers purchasing power?

Answer 19

The consumer’s purchasing power is less because their income will be able to purchase less of the good due to rising price of the good.

Question 20

What are two rationales behind the Law of Demand?

Answer 20

The substitution effect and the income effect.

Question 21

What are complementary goods?

Answer 21

Goods that are closely related to the original goods and are often purchased together with the original good.

Question 22

What would be an example of complementary goods?

Answer 22

Bread and Butter would be examples.

Question 23

If the price of butter falls what would you suppose happens to the demand for bread?

Answer 23

The demand for bread will increase if the price of butter decreases.

Question 24

What is a normal good?

Answer 24

A normal good is any good for which demand increases as consumer income increases.

Question 25

What is an inferior good?

Answer 25

An inferior good is any good for which demand decreases as consumer income increases.

Question 26

What happens to the demand for inferior goods when income decreases?

Answer 26

The demand for inferior goods increases when income decreases.

Question 27

What does a shift in the demand curve indicate?

Answer 27

A shift in the demand curve there has been a change in a variable previously held constant.

Question 28

When there is a change in the price of a good what happens to the demand curve?

Answer 28

A change in price results in movement along the demand curve.

Question 29

Movement along the demand curve is called what?

Answer 29

It is called a change in quantity demanded.

Question 30

What happens when there is a change in a variable previously held constant?

Answer 30

A change in a variable previously held constant results in a shift of the denad curve.

Question 31

What is a shift in the demand curve called?

Answer 31

It is called a change in demand.

Question 32

What symbol is used to indicate a new demand curve?

Answer 32

The symbol Prime is used with Q’ to indicate the new demand curve.

Question 33

How does the demand curve shift after an increase in income when purchasing bread?

Answer 33

The demand curve shifts outward after an increase in income because the quantity demanded of bread has increased at every price.

Question 34

How does demand respond to a change in the price of substitute goods?

Answer 34

When the price of substitute goods decreases, the quantity demanded of the original good decreases. If the price of substitute good increases then the demand for the original good increases.

Question 35

Which direction does the demand curve shift when there is a decrease in the price of substitute goods?

Answer 35

The new demand curve shifts inwards.

Question 36

How does the demand curve shift when there is a increase in the price of substitute goods?

Answer 36

The new demand curve shifts outwards.

Question 37

What happens to the demand curve when the price of complementary goods decreases?

Answer 37

The demand curve shifts outwards.

Question 38

What happens to the demand curve when complementary goods prices increase?

Answer 38

The demand curve shifts inwards.

Question 39

Which way does the demand curve shift when there is an increase in income regarding normal goods?

Answer 39

The demand curve shifts outwards.

Question 40

What happens to the demand curve when there is a decrease in income in regard to normal goods?

Answer 40

The demand curve shifts inwards.

Question 41

what direction does the demand curve shift when income increases regarding inferior goods?

Answer 41

The demand curve shifts inwards.

Question 42

Which direction does the demand curve shift when there is a decrease in income regarding inferior goods?

Answer 42

The demand curve shifts outwards.

Question 43

When there is an expectation that the price of a good will increase in the future what happens to the demand curve now?

Answer 43

The demand curve shifts outwards.

Question 44

If there is an expectation that the price of a good will decrease in the future what happens to the demand curve now?

Answer 44

The demand curve shifts inwards.

Question 45

When you change any of the factors that influence demand except price you will cause what?

Answer 45

You will cause a change in demand.

Question 46

When there is a change in price there is what?

Answer 46

There is a change in the quantity demanded.

Question 47

If technology becomes more efficiant how does this affect the demand curve?

Answer 47

The demand curve will shift outwards.

Question 48

If the gov’t were to impose a new tax on a good how would this affect the demand curve?

Answer 48

The demand curve would shift inwards.