General Economics
True or False: Economics is all about money.
False! Economics is a social science. In basic terms, economics is the study of people and their choices. It considers how things are made (produced), how things are moved around (distributed), and how things are used (consumed).
According to the law of demand, if all other factors remain the same, what happens to the quantity demanded if the price goes up?
Demand goes down.
If it is cold outside, what happens to the demand for ice cream? What direction does the demand curve shift?
Decrease in demand. Demand curve shifts to the left.
The relationship between ________ has determinants on prices of products entrepreneurs sell.
Supply and Demand
True or False: The Law of Demand is a definitive, set-in-stone rule that applies universally without exception.
False! The Law of Demand is a general principle -- not the end all, be all. It assumes all other factors do not change (such as consumer income, tastes, prices of related goods, etc.). In reality, we know these factors constantly change, which can influence demand in ways that may not always align perfectly with the Law of Demand.
If a popular social media influencer endorses a new brand of athletic wear, what is likely to happen to the demand for that brand? Why?
Increase (shift to the right). Increase in consumer preference for the good.
What is the driving question of economics?
How to satisfy consumer's wants and needs?
What kind of relationship is there between price and quantity demanded?
An inverse relationship.
If the price of Coca-Cola significantly increases, consumers may switch to purchasing more Pepsi. This illustrates how the demand for Coca-Cola is affected by the price of a _________.
Substitute good
Demand is an economic concept relating to what two facors?
(1) A consumer's desire to purchase goods and services; and
(2) a consumer's willingness to pay a specific price for them.
If there is only a change in price of a product and all other factors remain the same, how does demand move?
Along the demand curve. Price along DOES NOT shift the curve.
If consumers expect the price of gasoline to increase significantly next month, they may rush to fill up their tanks today, thus increasing the demand for gasoline. What does this example illustrate as to why there was an increased shift in demand?
Expectations
In the early days of the COVID-19 pandemic, widespread fear and uncertainty led to a significant increase in demand for a seemingly mundane household item -- toilet paper. This unexpected surge in demand demonstrates the powerful influence of ________ on consumer behavior.
Consumer expectations and perceived scarcity.
This phenomenon emphasizes the psychological and social factors that can dramatically impact demand, even for essential goods.
What are the 3 reasons for law of demand?
Substitution Effect, Income Effect and Law of Diminishing Marginal Utility.
If a family's income increases, they might switch from eating ramen noodles to enjoying more expensive takeout meals. This type of good, whose demand decreases as income rises, is known as...
An inferior good
What are all 5 shifters of demand?
(1) Preference (2) Number of buyers (3) Price of related goods -- i.e. substitutes or complements (4) Income relative to either normal or inferior goods (5) Expectations