Download Demand Ch. 4 Study Guide

Economics
CH 4 Review
Name:____________________________________
Hour:_____
CH 4: Demand Test Review
Answer the following questions and define the following concepts in your own words.
1. For demand to exist, what 2 factors must exist?
Desire for a good or service and availability in the market
2. Market demand curve: a graph showing how much of a product a market is willing and able to
buy
3. How does consumer taste affect demand?
Influences people to buy a specific good
4. Total revenue formula: TR=P x Q
5. What do business owners use market research for?
To gather information for market demand schedules
6. Describe what a demand curve looks like
Slopes downward from left to right
7. Elasticity of demand: measure of how responsive consumers are to price change
8. Substitution effect: change in the amount consumers will buy because they can but a different
product instead
9. The shape of the demand curve can be explained by: the law of diminishing marginal utility
10. Normal goods: consumers demand more when their income rises
11. How does the income factor affect demand?
For example, if hundreds of workers in a city are laid off from their jobs consumer spending will
dramatically decrease
12. Inelastic demand: when quantity demanded does not change significantly when price changes
13. Market size: affected by people moving to certain areas or locations
14. Points on a demand curve represent: change in quantity demanded
15. If consumers were to switch from having a house phone to cell phone, what is that an example
of?
Substitute goods
16. Complements: goods that go together. When demand for one good increases, the demand for a
complementary good also increases.
17. What does an individual demand curve represent?
The demand of a specific good or service by one person
18. Law of diminishing marginal utility: you receive the most satisfaction from the first good or
service than the second, third, etc.
19. Consumer expectation: future expectations can influence today’s buying habits
20. Why do tickets for local, non-professional sports teams cost so much less than for professional
sports teams? In your answer, consider the following:
 the two parts of demand
 the relationship between demand and price
 the factors that influence demand

Both parts of demand must exist: willingness and ability to purchase the tickets for the local
sports team must exist.
The price of the local sports team is much less due to the fact that it is less popular than the
professional sports team.
Demand is influenced by price; unknown sports teams sell tickets for less to attract people to
their games.
21. Draw a demand curve using the following individual demand schedule. Make sure to label your
graph accurately.
Price per DVD
$30
$25
$20
$15
$10
$5
Quantity demanded
0
2
4
6
8
15
22. Name and describe 2 of the 6 factors that can cause a change in demand.
a. Income: as income increases/decreases it affects a person’s ability to purchase goods
and services
b. Market size: if the number of consumers increases or decreases it also affects the
market size
c. Consumer tastes: when a good/service is popular consumers demand more of it at all
prices
d. Consumer expectations: future expectation can affect today’s buying habits
e. Substitute goods: goods and services that can be used in place of each other
f. Complementary goods: goods that are used together