Vocab Vault
The extra satisfaction from each additional unit of a good declines as you consume more.
What is diminishing marginal utility?
The elasticity coefficient is found by dividing the percent change in quantity demanded by this.
What is the percent change in price?
If price decreases and total revenue decreases, demand is this.
What is inelastic?
A change in the price of a good can shift its own demand curve.
What is false? Own-price changes cause a movement along the curve.
Salt and insulin are necessities with few substitutes, so their demand is this.
What is inelastic?
Goods that can replace one another, so a price increase in one increases demand for the other.
What are substitutes?
When the percent change in quantity demanded exactly equals the percent change in price, demand is this.
What is unit elastic, with a coefficient of 1?
If price increases and total revenue decreases, demand is this.
What is elastic?
A demand curve with an elasticity coefficient of 0 is perfectly horizontal.
What is false? It is vertical, or perfectly inelastic. Horizontal means an infinite coefficient.
Name-brand snacks and movie tickets have many substitutes, so their demand is this.
What is elastic?
A change in demand is caused by anything EXCEPT this.
What is the good's own price?
When calculating elasticity, you always drop the negative sign and use this.
What is the absolute value?
When the price of a good with inelastic demand goes up, total revenue does this
What is increases?
When a consumer expects future prices to fall, they typically buy more today.
What is false? They wait and buy less today.
The price of computers rises. Demand for software, a complement, does this.
What is decreases, or shifts left?
A table of price and quantity pairs, which becomes a demand curve when graphed.
What is a demand schedule?
Any price increase drops quantity demanded to zero, the coefficient is infinite, and the curve looks like this.
What is perfectly elastic, with a horizontal curve?
Stores selling elastic goods run sales all the time because lowering the price does this to total revenue.
What is raises it?
When the price of one substitute rises, demand for the other substitute rises.
What is true?
A town loses 1,000 residents. Demand for most goods does this, because of this shift factor.
What is shifts left, because of population?
Gas stations rarely offer sales because gasoline has this type of demand, and cutting the price would not raise this.
What are inelastic demand and total revenue?
A coefficient greater than 1 means demand is this, and these two traits make a good more likely to have it.
What is elastic, with many substitutes and being a luxury?)
A store raises the price of a product, and its total revenue goes down. Demand for this product is this, and a good example would be this.
What is elastic, with examples like restaurant meals, name-brand snacks, or movie tickets?
ANSWERS MAY VARY
The income effect and substitution effect explain a SHIFT in demand.
What is false? They explain a movement along the curve caused by the good's own price.
Explain why a change in price causes a movement along the demand curve instead of a shift.
What is: only the good's own price changed, and nothing else about the good changed, so we slide to a different point on the same curve? A shift needs some other factor, like income, tastes, or expectations.
ANSWERS CLOSE TO THIS WILL BE ACCEPTED