Download Demand Review Sheet

Demand Review Sheet
1. Demand is identified as amounts consumers are willing and able to buy at (all possible prices
/ each particular price) in a specific time period. A change in demand will be shown by a
(movement along / shift) of the Demand curve.
2. The Law of Demand says that price and quantity demanded are (directly/inversely) related.
Relatively high prices are associated with relatively (low/high) quantities demanded.
Relatively low prices are associated with relatively (low/high) quantities demanded.
3. The Demand curve will always have a (upward/downward) slope because of the
(inverse/direct) relationship between price and the quantity demanded.
4. The Income Effect is the increase or decrease in purchasing power brought on by a change in
the (price/demand) of the product. Higher prices lead to (increased / decreased) purchasing
power, lower prices lead to (increased / decreased) purchasing power.
5. The Substitution Effect says that consumers will usually substitute a (higher/lower) priced
product for a relatively (higher/lower) priced product.
6. A change in Demand is shown on a graph by a (movement along/shift) of the Demand curve.
A change in the quantity demanded is shown on a graph by a (movement along/shift) of the
Demand curve.
7. Substituting chicken as the price of steak goes up is an example of the (income/substitution)
effect.
8. When the price of CD’s fall, the purchasing power of our money rises and thus permits us to
purchase CD’s. This statement describes the (income/substitution) effect.
9. The Demand (curve/schedule) is a numerical tabulation showing the quantity demanded at all
possible prices. The Demand (curve/schedule) is a graphical representation of the Law of
Demand.
Plot the Demand Curve from the Demand Schedule
Demand Schedule for Tacos
$5
Price per Taco
Tacos Demanded
$5
100
$4
$4
200
$3
$3
300
$2
400
$2
$1
500
$1
0
100
200 300 400 500
600
10. Elasticity of Demand is the way price affects (demand/quantity demanded).
11. Demand that is very responsive to changes in price is (Inelastic/Elastic) demand. A
change in price results in a (larger/smaller) change in quantity demanded.
12. Demand that is not very responsive to changes in price is (Inelastic/Elastic) demand. A
change in price results in a (larger/smaller) change in quantity demanded.
13. Fur coats have (inelastic/elastic) demand. Gasoline has (inelastic/elastic) demand. Insulin
has (inelastic/elastic) demand.
Demand Shifters – Non-price factors that can change causing consumers to demand smaller or
larger quantities at each and every price. These changes will cause a shift in the demand curve.
“T” – Taste and preference of consumers (direct)
“I” – Income of consumers (normal – direct) (inferior – inverse)
“M” – Market size (population of consumers) (direct)
“E” – Expectations of future price or income (direct)
“R” – Related good prices (substitutes – direct) (complements – inverse)
14. With the invention of the cell phone, the demand for pay phones has (increased/decreased)
and the demand curve shifted to the (right/left).
15. When the United States opened up free trade with Mexico, the demand for Coca-Cola
(increased/decreased) and the demand curve shifted to the (right/left).
16. An increase in income would (increase/decrease) the demand for used clothing and the
demand curve would shift to the (right/left).
17. A decrease in the price of butter will cause the demand for margarine to (increase/decrease)
and it’s demand curve to shift to the (right/left).
18. After Nike signed Michael Jordan to advertise their products, the demand for Nike shoes
(increased/decreased) and the demand curve shifted to the (right/left).
19. An (increase/decrease) in the price of Pepsi causes the demand curve for Coca-Cola to shift
to the (right/left).
20. If there is a sale on dress shirts, the demand curve for ties will shift to the (right/left).
21. If you are about to lose your job, your demand for all products will (increase/decrease).
22. The demand for film (increases/decreases) if the price of the cameras increase.
23. If X and Y are substitutes, a decrease in the price of X will (increase/decrease) the demand
for Y.
24. Which graph below illustrates a:
a. change in quantity demanded (A / B)
b. and a change in demand (A / B).
Graph A
Graph B
$
$
P1
P1
P2
Q1
Q2
Q
Q1
Q2
Q
25. What causes a change in quantity demanded?__________________________
26. What causes a change in demand?______________________________