Demand Review II

What is defined as the desire, willingness, and ability to purchase a particular product at a particular price? Demand

What law states that at a certain point, the next unit of a product ads less benefit than the unit before? Law of Diminishing Marginal Utility

When price increases, what says that the quantities of the product demanded will decrease? Law of Demand

Create a demand curve showing the Law of Demand: P D Q

Create a demand curve showing the income effect: P D Q

Which of the following does NOT reflect the Law of Demand? Income effect Substitution effect Law of Diminishing Marginal Utility A change in consumer income A sale #4

What is the economic relationship of a hotdog and hamburger? Substitutes

What is the relationship between mustard and ketchup? Complements

What is the phrase that refers to the added benefit to consuming one more unit of a product? Marginal utility

What happens to the demand for orange juice when the price of lemon aid falls?

What happens to the demand for a product when the price of its complement decreases? Increases Shifts to the right

What happens to the demand for a product when the price of its substitute falls? Decreases Shifts to the left

Create a demand curve demonstrating what happens to the demand for Honda cars when the safety of Toyotas becomes doubtful:

What is the economic relationship between an IPod and earphones? Complements

What happens to the demand for earphones when the price of IPods increases? Decreases Shifts to the left

What happens to the demand for Prom dresses the week before a big price increase? Decreases Shifts to the left

Demand curve for glasses when contact lenses go on sale:

What do consumers do when price is higher than the product’s marginal utility? Stop buying the product

Which is NOT a factor that causes a change in demand (as opposed to a change in the quantities demanded)? Change in income Change in tastes or preferences Change in number of consumers (population) Change in the price of the item #4

What is the relationship between an electric fan and an air conditioning unit? Substitutes

What answers the following question? When price changes, how much do quantities demanded change? Elasticity Price elasticity Elasticity of demand

What are the 3 determinants of demand elasticity? Urgency/need Availability of adequate substitutes The proportion of income required to purchase the product

What is the likely elasticity of demand of a product that has adequate substitutes?

When a product is urgent without adequate substitutes, the price elasticity is likely: Inelastic

When a change in price causes a proportional change in quantities demanded, the elasticity is: Unit elastic

When price changes cause relatively larger changes in quantities demanded, the elasticity of demand is: Elastic

Create a demand curve that shows inelastic demand:

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