Demand Basics
What is demand?
The desire to own something and the ability to pay for it.
What causes a change in the quantity demanded?
A change in the price of the good.
What is elasticity of demand?
How consumers react to change in price.
What does the term supply refer to?
The amount of goods and services available.
What is one thing that can cause supply to increase?
Technology.
According to the Law of Demand, when prices decrease, what happens to quantity demanded?
Consumers buy more.
What causes a change in demand itself?
Factors other than price.
Demand is elastic when?
Price change can cause large changes in quantity demanded.
How does new technology usually affect supply?
It lowers costs and increases supply.
Lower prices lead to higher quantity demanded.
Hot dogs and hot dog buns are examples of what type of goods?
Compliments.
What is an example of an inelastic good?
Gasoline.
Why do higher prices encourage producers to supply more goods?
How do government regulations affect supply?
They decrease supply.
What is a demand schedule?
A table showing quantity demanded at different prices.
Which factor affects demand when people expect prices to rise in the future?
Change in expectations.
Which is the most important question to help determine elasticity?
Can the purchase be put off?
What is a supply schedule?
A chart listing quantity supplied at different prices.
A tax on the production of a good.
A new video game console is released for $600, but many consumers want it and cannot afford the price. According to the definition of demand, why does this situation show limited demand?
Because demand requires both the desire to buy the product AND the ability to pay for it.
How many factors can cause a change in demand?
Five.
If the price of insulin rises, and quantity demanded changes very little this means that demand of insulin is what?
Inelastic
After a major hurricane damages oil refineries along the Gulf Coast, gas stations have much less gasoline available to sell. According to the definition of supply, how would this situation affect supply in the market?
Supply would decrease because fewer goods are available for sale
What is an example of an excise tax?
Cigarettes.