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Demand
Chapter 4
Questions: Please answer the following questions as completely as possible.
1. How does the income effect and substitution effect explain the law of demand?
2. What are the three characteristics of the demand curve?
3. Using the following schedule, create a demand curve.
Costs to Play a Game
Games Played per
Month
$1.50
350
$2.00
250
$3.00
140
$4.00
80
4. Why would the demand for inferior goods increase during times of recessions?
5. How do future prices of goods effect a change in demand?
6. Explain how a change in consumer tastes and preferences effect a change in
demand. Give an example.
7. Using examples, explain how the price of related goods will have an effect on a
change in demand.
8. Use the following demand schedule to draw a demand curve. Then find and label
a combination of output and price that could result from: a) an increase in the
quantity demanded, b) an increase in demand, and c0 a decrease in demand
Price
Quantity
Demanded
$1
250
2
200
3
150
4
100
5
50
9. Why is knowing the elasticity of a product helpful to producers?
10. In a tree map, explain the factors that effect elasticity of demand.
11. Using the formula in your book, calculate the exact elasticity of demand in the
following examples. Then tell if, in each case, demand is elastic, inelastic or
unitary elastic.
a. When the price of a deluxe car wash rises from $10 to $11, the number of
daily customers fall 60 to 48.
b. A dentist with 80 patients cuts his fee fro a cleaning from $60 to $54 and
attracts 2 new patients.