Download chapter 4 demand

CHAPTER 4 DEMAND
State the law of demand. an economic law, which states that consumers buy more of a good when its price
is lower and less when its price is higher.
What is the relationship between Price and Quantity Demanded? In economics, the law of demand is an
economic law, which states that consumers buy more of a good when its price is lower and less when its
price is higher(ceteris paribus).
State the difference between a demand schedule, demand curve, individual schedule, market schedule.
DS: a table which list the quantity of a good a person will buy at each different price.
Why is the demand curve downward sloping?
DC: a graphic representation of a demand schedule
IS:
MS: a table that list the quantity of a good all consumers in a market will but at every different price
Explain how the substitution effect helps create a downward sloping demand curve.
People will buy less of that good because of a better price so the will be less of a demand for that good
List the nonprice determinants of demand.
Income
Price of related goods
Preferences
Expectation
What effect will the following have on demand? Will it increase or decrease? Which way will the curve shift?
a.
more advertising of the product increases, up
b.
tests results indicate use of the product can cause cancer decrease, down
c.
consumer incomes rise increase, up
Know how the total revenue test of demand elasticity works. Specifically,
a. Total Revenue will go (up) (down) when you raise the price of an inelastic
product. Down
b. Total Revenue will go (up) (down) when you lower the price of an inelastic
product. Up
c. Total Revenue will go (up) (down) when you raise the price of an elastic
product. Stay same or up
d. Total Revenue will go (up) (down) when you lower the price of an elastic
product. Up
Draw a graph showing a decrease in quantity demanded.
What is unitary elasticity? Elasticity is equal to one
What is the income effect? Change in consumption as a change of income
CHAPTER 5 SUPPLY
State of the Law of Supply. The tendency of suppliers to offer more of a good at a higher price
What is the relationship between Price and Quantity Supplied? The amount a suppliers willing and able to
supply at a certain price
What is the difference between a supply schedule and a market supply schedule? A
What is the formula for computing Total Profits? Tp= sell price cost/ sell price
What are the two types of costs that make up total costs? Sell price cost and sell price
Define costs of production. The amount of money to make a product
What are the characteristics of an elastic supply? Supply can change with little effect on cost Inelastic supply?
Supply can change with a big effect on cost
What is the effect of the following on supply (Specifically, will supply increase or decrease? Which way will
the supply curve shift?)
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•
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Government increases corporate taxes increase right
Labor union demands, and receives, higher wages decrease left
Improved technology makes production costs go down increase to right
Define marginal costs, the price of producing one more unit of a good
increasing marginal costs, making money
diminishing and negative marginal costs. Losing money
Which type of costs affect marginal costs - fixed costs or variable costs? Variable
When is a firm most profitable? When it make more money than it uses
Draw a graph showing an increase in supply.
CHAPTER 6 PRICES
What purpose do prices serve?
What is the most commonly known negative externality?
What is the difference between a public good and a private good? Give an example of each.
Define market equilibrium; equilibrium price; equilibrium point and know what happens when equilibrium
shifts.
Draw a graph illustrating a shortage; a surplus, price ceiling, price floor.
When does the government subsidize and industry?
Know all vocabulary words.