1. Graphing the Demand Curve A. A demand schedule is a table of prices and the quantity demanded at each price. B. Lists quantity demanded at different prices C. A demand curve graphs the quantity demanded of a good or service at each possible price.

2. Why do you think graphing the demand curve would be useful to businesses? Quantity Demanded vs. Demand A. A change in quantity demanded is caused by a change in the price of a good. B. If something other than price causes demand to increase or decrease, this is known as a change in demand and shifts the demand curve.

3. Think of some factors or events other than price that can cause demand as a whole to increase or decrease? Give examples of such a factor or event. Changes in the environment or political climate can cause demand to increase. For example, if there is a blizzard the overall demand for snow shovels will probably increase. If a large scale war suddenly ends, the demand for weapons will decrease.

4. Determinants of Demand A. Population B. Income C. Tastes and preferences, including fads. D. Substitutes are when a new competitor is added or an old competitor leaves the market. E. Complementary goods are products that rely upon one another, demand for one affects demand for the other.

5. For products that fill the three basic needs (food, clothing, and shelter), which determinant(s) of demand would be the most significant and why? Substitutes and/or income should be the most significant determinants. Income will affect how much a person can afford to spend on any one item of clothing or meal. Substitutes make it possible for the consumer to choose a different item to meet the need.

6. The Price Elasticity of Demand A. How much consumers respond to a given change in price is elasticity. B. Elastic demand occurs when the demand for some goods is greatly affected by the price. C. Inelastic demand occurs when the demand for some goods is less affected by price. D. How many substitutes exist and how closely they provide the same quality and service affects elasticity of demand (fewer or no substitutes make demand inelastic). E. Percent of a personal budget spent on that item affects elasticity of demand (the higher the percent of budget, the more elastic the demand). F. How much time consumers have to adjust to the new price affects elasticity of demand (more time makes for greater elasticity).

7. Do you think it is in a company’s best interest to drastically change the price of a popular product and give consumers months to buy the product at the new price? Why or why not? It depends upon the type of product and whether or not the price was increased or decreased. If it is a product with elastic demand and the price is decreased then the longer time at the lower price will mean more buyers. However, if the price is increased, the longer time period will give people time to find other options substitutes, doing without, etc.