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Economics Chapter 4 Essential Questions 1. What two conditions must be present for Demand to exist for a product or service? 2. What does the Law of Demand state? Give an example other than the one given in the book. 3. Describe the Substitution Effect and how it relates to demand. Then explain what would happen to the quantity demanded of Taco Bell tacos if there were a change in the price of burritos. 4. What useful information does a market demand schedule give to business owners? 5. What can business owners predict by creating a demand curve? What is its limitation? 6. What does movement along a demand curve represent? 7. What does it mean if the entire demand curve shifts? 8. What is the difference between normal goods and inferior goods? How does a change in income affect both of them? 9. Why are corn and soybean farmers prospering? Why are livestock farmers not prospering? 10. How do our expectations about the future affect our demand for certain goods and services? 11. Give an example of how the size of a population changes demand for goods and services. 12. How can businesses influence consumer tastes and preferences? 13. What is the difference between substitute goods and complementary goods? How does each affect demand? 14. Give an example of an elastic good and an inelastic good. 15. How would a business owner calculate the elasticity of the good or service he sells? 16. List and explain factors that affect the elasticity of a good or service? 17. Why will revenue fall if a business raises the price of their good whose demand is elastic? 18. How does elasticity affect a business owner’s pricing policy?