Economics Chapter 4 Test Questions – Flashcards
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Demand
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Which economic term is defined as the desire to have a good or service and ability to pay for it?
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When prices go up, quantity demand increases; when prices go up, quantity demand decreases
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Which of the following restates the law of demand?
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A table showing how much of a product and individuals willing and able to buy.
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What is a demand schedule?
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The sum of all the individual demand curves in a market
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What does a market demand curve show?
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The demand for a product will be influenced by price, income levels, consumer preference, competition, and fashions.
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What outside forces affect your demand for products?
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Change in quantity demanded
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And increase or decrease in the amount that consumers are willing and able to buy in response to a change in price
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Normal goods
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Goods that consumers demand more of when their incomes rise
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Substitution effect
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A change in the amount that consumers will buy because the purchasing power of their money changes
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Law of diminishing marginal utility
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The idea that the marginal benefit of using each additional unit of a product during a given period will decline
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Substitutes
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Goods and services that can be used in place of each other
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Inferior goods
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Goods that consumers demand less of when their incomes rise
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Income effect
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A change in the amount that consumers will buy because they buy other goods instead
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Complements
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Goods and services that are used together
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Change in demand
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The change in the amount demanded because of a change in price
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The law of diminishing marginal utility
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States that the marginal benefit of using each additional unit of a product during a given period of time will decline
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The measure of how responsive consumers are to price change
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What is elasticity?
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Elastic
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If quantity demanded changes significany when price changes, how is demand described?
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Shallow slope
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How does the slope on an elastic demand curve look?
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To measure elasticity
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Why is a total revenue test used for?
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Goods that have no substitutes
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Which of the following categories is most likely to have inelastic demand?
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The demand for leather coats would be elastic because leather coats would be a luxary because there are many substitutes for them
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Demand for leather coats?
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Elasticity of demand
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How responsive consumers are to price changes in the marketplace
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Elastic demand
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When change in price leads to a relatively larger change in the quantity demanded
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Inelastic demand
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When change in price leads to smaller change in quantity demanded
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1. Substitute goods or services 2. Proportion of income 3. Necessities versus luxuries
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Three factors that determine elasticity of demand
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Desire for a good or service and the ability to pay for it
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What two factors are necessary for demand?
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Consumer taste
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And after sets off a crazy for wearing camouflage clothing among her friends. What factors affecting demand?
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A graph showing how much of a product a market is willing and able to buy
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What is a market demand curve?
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Multiplying price by quantity sold
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How is total revenue calculated?
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Market research
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What do business owners use to gather information for market demand schedules?
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It slopes downward from left to right
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Which of the following describes a demand curve?
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Elasticity of demand
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Which economic concept is defined as the measure of how responsive consumers are to price change?
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Substitution effect
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What term is defined as the change in the amount consumers will buy because they can buy a different product instead?
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The law of diminishing marginal utility
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What explains the shape of a demand curve?
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Normal goods
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What term is defined as goods that consumers demand more of when their incomes rise?
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Income
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A factory closes, laying off hundreds of workers, and consumer spending in the town falls, what factors are affecting demand?
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Inelastic
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If quantity demanded does not change significantly when price changes, how is demand described?
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Market size
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Skiers flock to a town in the Rockies in January, and restaurant business booms. What factors affecting demand?
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Change in quantity demanded
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What do you various points on a demand curve represent?
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Substitutes
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Many US consumers have switched to wireless phones from traditional telephones. What factors affecting demand?
