Demand Core
What two conditions must be true for economic demand to exist?
A consumer must be both willing and able to buy the product.
State the Law of Supply regarding the relationship between price and quantity.
Firms will sell more at a higher price and less at a lower price.
Which direction does a curve shift when there is an increase in supply or demand?
To the right.
A national report shows household incomes rose by 5%. What happens to demand for normal goods like organic produce?
Demand increases (shifts right).
Over 100 new microbreweries open across the regional market. What happens to craft beer supply?
Supply increases (shifts right due to Number of Sellers)
State the Law of Demand regarding the relationship between price and quantity.
People buy more at a lower price and less at a higher price.
Raw materials, worker wages, and equipment are known as what? (hint: this is one of the reasons for change in supply)
Factors of Production
Which direction does a curve shift when there is a decrease in supply or demand?
To the Left.
Gasoline prices surge to $6.50 a gallon. What happens to the demand for electric cars?
Demand for electric cars increases (shifts right).
A major lithium discovery cuts battery production costs in half. What happens to electric vehicle supply?
Supply increases (shifts right due to lower Factor Costs)
Hot dogs and hot dog buns are consumed together. What economic term describes these goods
Complements (or Complementary Goods)
If worker wages or raw material prices go up, what happens to the supply of the good?
Supply decreases (shifts left)
What term describes how strongly a change in price affects the quantity demanded?
Elasticity of Demand.
A viral social media trend causes millions to adopt a new lifestyle of sleeping in dog beds. What demand determinant is this?
Change in Styles, Tastes, or Habits.
A new company opens up new offshore rigs and major refineries. What happens to the gasoline supply?
Supply increases (shifts right due to a change in the number of sellers in the market)
Coca-Cola and Pepsi are items you buy in place of each other. What economic term describes these goods
Substitutes (or Substitute Goods)
When automated assembly line robots speed up factory production, what determinant changed?
Change in Technology
If a small change in price causes a big change in quantity demanded, is demand elastic or inelastic?
Elastic.
Thousands of college students move into town every August. What happens to the demand for fast food in that town when August hits?
Demand increases (shifts right due to Number of Buyers)
Game studios shift developers to mobile games because console game profits sank. What determinant changed for console games?
Change in Profit Opportunities of Other Products
If the price of hot dog buns skyrockets, what happens to the demand for hot dogs?
Demand for hot dogs decreases
If seller expectations lead farmers to hold back grain today for higher future prices, what happens to current supply?
Current supply decreases (shifts left)
Why is the demand for gasoline considered inelastic?
Price changes have little effect on quantity bought because people still need it for their cars AND if it's cheaper, that doesn't mean that their gas tanks get bigger.
People rush to buy gas today anticipating a major fuel tax increase tomorrow. What demand determinant is active?
Change in Expectations.
Dairy farmers expect milk prices to collapse next month, so they ship all stock today. What happens to supply today?
Supply increases today (shifts right due to Producers' Price Expectations)