Economics Chapter 4: Demand Test Questions

question

Microeconomics
answer

the study of the economic behaviors and decisions of small units, such as individuals and businesses
question

Demand
answer

the willingness to buy a good or service an the ability to pay for it
question

Law of Demand
answer

states that when prices go down, quantity demanded increases. When prices go up, quantity demanded deceases
question

Demand Schedule
Demand Schedule
answer

a table listing of how much of an item an individual is willing to purchase at each price
question

Market Demand Schedule
answer

table listing of how much an item all consumers are willing to purchase at each price
question

Demand Curve
Demand Curve
answer

a graph that shows how much of a good or service an individual will buy at each price. Graphically shows the data from a demand schedule
question

Market Demand Curve
Market Demand Curve
answer

A graph that the quantity that all consumers are willing and able to buy at each price. Graphically shows the data from a market demand schedule
question

Vera Wang
answer

fashion designer who made a fortune starting a company designing high end wedding gowns for the rich and famous
question

Law of Diminishing Marginal Utility
answer

states that the marginal benefit of using each additional unit of a product during a given period will decline
question

Income Effect
Income Effect
answer

the change in the amount that consumers will buy because the purchasing power of their income changes
question

Substitution Effect
Substitution Effect
answer

a change in the amount that consumers will buy because they buy substitute goods instead
question

Change in Quantity Demanded
Change in Quantity Demanded
answer

an increase or decrease in the amount demanded because of change in price
question

Change in Demand
answer

occurs when something prompts consumers to buy different amounts at every price
question

Normal Goods
Normal Goods
answer

goods that consumers demand more of when their incomes rise
question

Inferior Goods
Inferior Goods
answer

goods that consumers demand less of when their income rise
question

6 Factors That Cause a Change in Demand
answer

income, market size, consumer expectations, consumer taste, substitute goods, complementary goods
question

Income
Income
answer

If a consumers income rises they tend to demand more normal goods and less inferior goods. If a consumers income decreases they tend to demand less normal goods and more inferior goods.
question

Market Size
Market Size
answer

Usually has a corresponding effect on demand. If Market Size increases demand increases if Market size decreases demand decreases.
question

Consumer Tastes
answer

If a product becomes popular its demand increases. If a product looses popularity demand decreases.
question

Consumer Expectations
Consumer Expectations
answer

Your expectations for the future can affect your buying habits today.
question

Substitutes
answer

Goods and services that can be used in place of each other. If the price of a substitute drops it will cause people to buy the substitute instead. If the price of a substitute rises it will increase demand of the original.
question

Complements
Complements
answer

Goods that are used together so a rise in demand for one increases the rise in demand of the other.
question

Elasticity of Demand
answer

A measure of how responsive consumers are to price changes
question

Elastic
answer

Quantity demanded changes significantly as price changes
question

Inelastic
answer

Quantity demanded changes little as price changes
question

Unit Elastic
answer

When the percentage change in price and quantity demanded are the same
question

Factors That Affect Elasticity Demand
answer

The three factors that affect elasticity demand are: Substitute Goods or Services, Proportion of Income, and Necessities Versus Luxuries.
question

Necessity
Necessity
answer

A necessity is something you must have,such as food or water.
question

Luxury
Luxury
answer

A luxury is something that you desire but that is not essential to your life, such as a plasma television.
question

Total Revenue
Total Revenue
answer

The amount of money a company receives for selling its products.
question

Total Revenue Test
Total Revenue Test
answer

a method of measuring elasticity by comparing total revenues. If total revenue increases after the price drops, then demand is considered elastic. If total revenue decreases after the price is lowered, demand is considered to be inelastic.

Get instant access to
all materials

Become a Member