unit 2: supply and demand

Question 1

demand

Answer 1

the desire, ability, and willingness to buy a product

Question 2

microeconomics

Answer 2

deal with behavior and decisions by making small units, such as individuals and firms

Question 3

law of demand

Answer 3

quantity demand of a good or service varies inversely with its price

Question 4

demand schedule

Answer 4

listing of quantity demanded at all possible prices

Question 5

demand curve

Answer 5

graph of quantity demanded at all possible prices

Question 6

marginal utility

Answer 6

the extra usefulness or satisfaction a person gets from acquiring or using one more unit of a product

Question 7

diminishing marginal utility

Answer 7

the extra satisfaction we get from using additional quantities of the product begins to diminish

Question 8

market demand curve

Answer 8

shows the quantities demanded by EVERYONE who is interested in purchasing the product

Question 9

what is demand?

Answer 9

how many of an item a consumer is willing to buy

Question 10

demand rule: low prices=

Answer 10

high demand = high supply

Question 11

list the 6 factors that affect demand:

Answer 11

1. consumer income
2. consumer taste
3. substitute
4. compliments
5. change in expectations
6. number of consumers

Question 12

consumer income:

Answer 12

1. increase in income allows consumers to buy more products ( shifts the graph RIGHT)
2. decrease in income would shift the curve LEFT showing decrease in demand

Question 13

consumer taste:

Answer 13

1. advertising, news reports, fashion trends, introduction of new products and even changes in the season can impact consumer taste
2. tastes and preferences change over time (demand for healthier food)

Question 14

substitutes:

Answer 14

the demand for a product increases if the price of the replacement(off-brand) goes up and vice versa ( if the price of butter is too high, you can buy margarine for cheaper)

Question 15

compliments:

Answer 15

the use of one good increases the use of another (if you have a car, you need gas)

Question 16

change in expectations:

Answer 16

the way people think about the future (evolution; VHS to DVD to Blu-Ray to streaming services)

Question 17

number of consumers:

Answer 17

a change in income, tastes, and prices of related products

Question 18

pros and cons of buying a car:

Answer 18

Pros: full ownership, you can sell it, modify your own car
cons: more expensive, in charge of your own repairs

Question 19

pros and cons of leasing:

Answer 19

pros: don’t have to worry about repairs, new car for 2-3 years, cheaper
cons: you don’t own it

Question 20

why do you not want to lease a car?

Answer 20

cars are the #1 item that depreciates the fastest

Question 21

depreciation:

Answer 21

a reduction in the value of an asset with the passage of time, due in particular to wear and tear

Question 22

elasticity:

Answer 22

a measure of responsiveness that tells us how a dependent variable such as quantity responds to a change in an independent variable such as price

Question 23

demand elasticity:

Answer 23

a change in price causes a change in the quantity demanded

Question 24

elastic:

Answer 24

a given change in price causes a relatively larger change in quantity demanded

Question 25

inelastic:

Answer 25

a given change in price causes a relatively smaller change in quantity demanded

Question 26

elastic demand:

Answer 26

the demand for vegetables are higher in the summer because the prices are cheaper as opposed to the winter

Question 27

inelastic demand:

Answer 27

products like table salt do not see much of a change on the quantity purchased based on their price

Question 28

unit elastic demand:

Answer 28

some products or services falls midway between elastic and inelastic (a 5% drop in price would cause a 5% increase in quantity demanded)

Question 29

total expenditures:

Answer 29

the amount that consumers spend on a product at a particular price to MEASURE DEMAND ELASTICITY

Question 30

total expenditures test:

Answer 30

found by multiplying the price of a product by the quantity demanded for any point along the demand curve