Vocab
Demand
How many people are in an individual demand curve?
1
The price changing causes a __________ on the demand curve. (movement or shift?)
Movement
When demand increases, the demand curve shifts to the______
Right
What is the equation for total revenue?
Price (quantity demanded)
What is utility?
The usefulness of a good
What is a demand schedule?
A chart that shows points on the demand curve - shows quantities demanded at possible prices.
When the price of a good goes up, consumers turn to other products to save money.
This is an example of the:
The price of cream cheese goes up at Dunkin Donuts. What is going to happen to the demand of bagels?
Demand for bagels will go down
What does it mean when demand is inelastic?
The change in price causes a SMALL change in the quantity demanded
What is the Law of Demand?
An increase in the price, a decrease in the quantity demanded
How do you find the market demand?
You add up all the quantities demanded in a market.
This is an example of the:
Income Effect
List the 5 shifters of demand.
I-RENT
Income
Related Goods
Expectations
Number of Consumers
Tastes/Preferences
What does it mean to have elastic demand?
The change in price causes a LARGE change in quantity demanded.
What is Ceteris Paribus?
Changing one thing only
In economics, price changes, everything else stays the same.
True or false: the demand curve shows us exactly what will happen when prices go up and down.
False - it shows us hypothetical prices
What is an inferior good?
Give an example
Inferior good: A good people buy less of when their income increases
Ramen, taxi rides, etc.
What is a complement?
Give an example
Complement: something that completes or increases the usefulness of another good.
EX: computers and software, donuts and coffee, spicy food and a drink
When the elasticity is perfectly INELASTIC, what does the demand curve look like?
A straight, vertical line.
What is Diminishing Marginal Utility?
The decrease in the utility of a good as you use/consume more of it
EX: eating pizza
Why does the demand curve slope downwards?
The Law of Demand and Diminishing Marginal utility
What is the difference between the Substitution Effect and the Substitution Shifter?
The Substitution Effect deals with THE PRICE OF THE GOOD ITSELF.
The Substitution Shifter deals with OUTSIDE FACTORS.
Give an example of the Income Shifter
When people earn more, they are willing to spend more.
When demand for a good is ELASTIC and the price goes up, what will happen to the total revenue?
The total revenue will go DOWN.
When a good is elastic, it typically means there are substitute easily available/people don't find that good necessary.
Because of this, if the price goes up, people will stop buying it because there are other goods they can get.
Therefore, the company selling the good will lose money, because people will buy less.