Midterm II Flashcards
What is a change in demand?
A rightward or leftward shift of the entire demand curve; caused by a change in something other than the price of the good.
Changes can include factors such as consumer income, prices of related goods, tastes, consumer expectations, and the number of buyers.
What are the ceteris paribus conditions of demand?
Common occurrences that cause demand to shift.
These include changes in consumer income, prices of related goods, tastes/quality, consumer expectations, and the number of buyers.
What happens to demand when consumer income increases for a normal good?
Demand expands.
Normal goods see increased demand as consumers become richer.
What happens to demand when consumer income decreases for a normal good?
Demand contracts.
Normal goods see decreased demand as consumers become poorer.
What is an inferior good?
A good where demand contracts when consumers get richer and expands when consumers get poorer.
Example: Ramen noodles.
What is the effect on the demand for Good B if the price of Good A rises, assuming they are complements?
The demand for Good B contracts.
Complements are goods that are often consumed together, such as peanut butter and jelly.
What is the effect on the demand for Good B if the price of Good A falls, assuming they are complements?
The demand for Good B expands.
Complements exhibit this relationship where a decrease in the price of one increases the demand for the other.
Fill in the blank: A rightward shift in the demand curve is known as an _______.
expansion of demand.
Fill in the blank: A leftward shift in the demand curve is known as a _______.
contraction of demand.
What is the relationship between the price of Good A and the demand for Good B when they are complements?
When the price of Good A rises, the demand for Good B contracts; when the price of Good A falls, the demand for Good B expands.
