Demand and Quantity Demanded
Which scenario best represents the Law of Demand? Select all that apply
The price of watermelon increases by 20%, the demand for watermelon increases
The price of pencils increases by 20%, the demand for pencils decreases
The price of cars decreases by 5%, the demand for cars increases
The price of chocolate decreases by 2%, the demand for chocolate decreases
2.The price of pencils increases by 20%, the demand for pencils decreases
3.The price of cars decreases by 5%, the demand for cars increases
What is an incentive?
Motivation to work
What are the 3 different types of elasticity?
Elastic, Inelastic, Unit elastic
Does this represent change in quantity demanded or a change in demand? If relevant, what is the shifter?
Market: Bunny Slippers
Scenario: Ariana Grande, the popular teen singer, wears bunny slippers to an awards show.
Change in Demand, consumer tastes
What is the substitution effect?
Change in demand of expensive items to more cheaper alternatives
Replacing one item with another
More consumption of one unit than another
Change in demand of something because of less supply
1. Change in demand of expensive items to more cheaper alternatives
The market is ice cream. What will happen if the price of cones decreases?
Change in demand; complements; shift to the right
Change in quantity demanded; complement; shift to the right
Change in demand; substitute, shift to the right
Change in quantity demanded; complement; shift to the left
1. Change in demand; complements; shift to the right
Which is an example of consumer tastes and preferences?
The price of a product increases
A popular celebrity makes a certain brand of shows trendy
The cost of producing a product decreases
The government increases taxes on a product
2. A popular celebrity makes a certain brand of shows trendy
What determines elasticity?
Whether a product is stretchy or not.
How much the price changes.
How much of the product is being made.
Whether something’s purchase can be delayed or not.
4. Whether something’s purchase can be delayed or not.
Does this represent change in quantity demanded or a change in demand? If relevant, what is the shifter?
Market: Chinese Food
Scenario: A new apartment complex has been built across the street from the Chinese food restaurant
Change in Demand, number of consumers
What is the income effect?
If there is more income, then there is more demand because there is less money to spend
If there is more income, then there is less demand because there is more money to spend
If there is more income, then there is more demand because there is more money to spend
There is no effect; everything remains the same
3. If there is more income, then there is more demand because there is more money to spend
What is the difference between the change in demand and the change in quantity demanded?
One’s change isn’t determined by a shifter.
What is an example of future expectations?
A weather channel predicts a bad year for crops, so people stock up
A commercial tells people that on Friday there will be a 20% discount on TVs, people buy TVs on Monday
This is impossible, you can’t predict the future of prices.
How durable you expect a product to be.
1. A weather channel predicts a bad year for crops, so people stock up
What is the difference between Perfectly Inelastic and Perfectly Elastic?
Both stay the same
Elastic is when consumers only buy at a specific price, and inelastic is when the quantity demanded is the same at any price
Both change with price
Elastic is when the quantity demanded is the same at any price, inelastic is when there is when consumers only buy at a specific price
2. Elastic is when consumers only buy at a specific price, and inelastic is when the quantity demanded is the same at any price
Does this represent change in quantity demanded or a change in demand? If relevant, what is the shifter?
Market: Hot dogs
Scenario: The price of hamburgers drops 40%
Quantity demanded
: Which is an example of marginal utility?
The difference between the utility of 2 things, ex. A $10 notebook and a $20 notebook.
The amount of satisfaction from consuming a product; more is not always better. Ex. How you feel after eating 1 more donut; good, neutral, or bad?
The amount of satisfaction from consuming a product; more is always better. Ex. Feeling good after eating more cookies because they taste good.
This term doesn’t exist.
2. The amount of satisfaction from consuming a product; more is not always better. Ex. How you feel after eating 1 more donut; good, neutral, or bad?
A popular clothing store lowers the price of its hoodies by 30%. Does this cause a change in demand or quantity demanded?
Quantity demanded
What is an example of the price of related goods?
Peanut butter and jelly; when jelly increases in price, people buy less peanut butter.
Fries and ketchup; when ketchup increases in price, people buy more fries.
Books and milkshakes; they are both things that Katie bought today.
A water bottle and pens; they are both things you buy for school.
1. Peanut butter and jelly; when jelly increases in price, people buy less peanut butter.
A customer stops buying a brand of cereal when its price increases because many similar brands are available. Is demand elastic or inelastic?
Elastic because many substitutes are available.
Draw what happens to the demand curve.
Market: Airplane tickets
Scenario: Airplane ticket prices increase 25%
Shifts to the left
On a Market Demand Curve what is on the X-axis, Y-axis, and which way does it slope?
X-asis = Price (P)
Y-axis = Quantity Demanded (Q)
Downward sloping
The market is TVs. The price might go down a lot for Black Friday, which is next week. What’s the shifter & direction of the curve?
Left, future expectations.
What are the 5 shifters of demand?
Consumer Income, Consumer tastes/preference, future expectations, # of consumers, price of related goods
A medication is necessary for a person's health, and there are no other substitutes. Is demand elastic or inelastic when the price increases?
Inelastic because the medication is necessary and there are no substitutes.
Draw what happens to the demand curve.
Market: Video games
Scenario: Game console prices drop 15%
Shifts to the right
When drawing a shift in a Demand Curve, should put the arrows up and down, or left and right?
Left and right