THEME 2

Question 1

What is a consumer individual demand?

Answer 1

Relationship between the price and the quantity she is willing and able to pay for a good.

Question 2

What happens if MV(Q)>P

Answer 2

You buy it

Question 3

What happens if MV(q)<P ?

Answer 3

You don’t buy it

Question 4

What are the factors affecting demand?

Answer 4

-Price of the good
-Other reasons: price of other goods, household income, etc.

Question 5

What happens on the demand curve if there is a change in price ?

Answer 5

Movement along the demand curve (see p.19 of pwp2)

Question 6

What happens to a demand curve when another factor than the price is changed?

Answer 6

Shift of the demand curve (see p.19 pwp)

Question 7

Demand is relatively elastic Ep…

Answer 7

<-1

Question 8

Demand is unit elastic, Ep…

Answer 8

=-1

Question 9

Demande is relatively inelastic, Ep…

Answer 9

-1<Ep<0

Question 10

Is elasticity constant?

Answer 10

NO

Question 11

What does it mean if the price elasticity of demand (Ep) is zero?

Answer 11

Demand is perfectly inelastic, meaning qty demanded does not change with price changes.

Question 12

What does it mean if the price elasticity of demand (Ep) is negative infinity?

Answer 12

Demand is perfectly elastic, meaning any price increase will reduce qty demanded to zero.

Question 13

How do elasticities help understanding the demand for a good?

Answer 13

It summarize how the quantity demanded response to change in price or income.