1. What’s Happening with Demand
Chapter Four Test Review

2. Elasticity where a change in the independent variable (usually price) generates a proportional change dependent variable (quantity demanded or supplied).  
Unit Elastic

3. Income Effect Substitution Effect Diminishing Marginal Utility
What are the three reasons for the
L law of demand?
Income Effect
Substitution Effect
Diminishing Marginal
Utility

4. The three factors that determine whether a product’s demand is elastic or inelastic.
a) Are their close substitutes available. If yes then elastic. If no then inelastic. b) How important it is to your household budget. If it is expensive, then it is elastic. If it is cheap, then it is inelastic. c) The period of time involved. If its short-term, people tend to be inelastic. Over time they adjust and can be elastic.

5. Diminishing Marginal Utility
People get less usefulness or satisfaction as they consume more and more of a product.
Diminishing Marginal Utility

6. Type of elasticity where the percentage change in an independent variable (usually price) results in a larger change in the dependent variable (usually quantity demanded or supplied).
Elastic

7. Change in Quantity Demanded
Movement along a stable demand
curve showing that a different quantity is purchases in response to a change in price of that product.
Change in Quantity Demanded

8. Willingness
and ability to buy
at a given price
Demand

9. Consumer demand for different accounts at every price that make the demand curve shift left of right. Shown by a shift of the entire demand curve. Right for an increase and left for a decrease.
Change in Demand

10. TRIPE or factors that cause a Change in Demand
Tastes and Preferences, Related Goods, Income, population, and expectations
Shifts the entire demand curve
TRIPE or factors that cause a Change in Demand

11. Substitution Effect The portion of a change in quantity
demanded that is caused by a change in price that makes other products less costly.
Substitution Effect

12. Branch of economic theory that deals with behavior and decision making by small units such as individuals and firms.
Microeconomics

13. Measure of responsiveness that tells us how a dependent variable, such as quantity, responds to a change in an independent variable, such as price.
Elasticity

14. When the price of a product decreases I buy more quantity
When the price of a product decreases I buy more quantity. When the price rises I buy less quantity. An inverse relationship.
Law of Demand

15. Type of elasticity where the percentage change in an independent variable (usually price) generates a causes a less than proportionate change in the dependent variable (quantity demanded or supplied)
Inelastic

16. Income Effect The portion of a change in quantity
demanded that is caused by a price change. This has nothing to do with one’s pay or income.
Income Effect

17. Increase in Demand P S p1 p D1 D Q q q1
D  .: P ↑ & Q ↑

18. Decrease in Demand P S p p1 D D1 Q q1 q
D  .: P↓ & Q↓

19. When demand increases:
The demand curve shifts_____.
rightward
Equilibrium price and quantity ______
increase

20. Increase in Demand P S p1 p D1 D Q q q1
D  .: P ↑ & Q ↑

21. When demand decreases:
The demand curve shifts_____.
leftward
Equilibrium price and quantity ______
decrease

22. Decrease in Demand P S p p1 D D1 Q q1 q
D  .: P↓ & Q↓