#### Chapter 4 : The Demand for Goods and Services

Price goes up demand goes down
Price goes down demand goes up

Define Law of Demand : (Listing Question)

the amount of a good that consumers are willing and able to purchase at a particular price over a given period of time (movement)

Define Quantity of Demand :

movement - change in price (is on the same line on the graph)

What is the movement for quantity of demand?

1. Substitution Effect
2. Income Effect

What are two factors that affect a consumer buying?

when an increase in the price of a good causes a consumer to switch away from that good & toward other goods that do not experience a price increase

Define Substitution Effect :

price of coke doubles so you buy pepsi

What is an example of a substitution effect ?

the change in consumption that occurs when a price increase causes consumers to feel poorer or when a price decrease causes them to feel richer or an actual change in income (the more $you make the more buy or the less$ you make, the less you buy)

Define an Income Effect :

a table that relates the quantity demanded of a particular good to its price

Define a Demand Schedule :

a graphical representation of the demand schedule for a good showing the quantity demanded at each price (Shift)

Define a Demand Curve :

a change in the amount people are willing and able to buy at every price (change in demand and it is side to side)

Shift of the demand curve represents :

right

**Increase in demand will shift the curve to the :

left

**Decrease in demand will shift the curve to the

a shift of the demand curve due to the quantity demanded not a change in price - (shift - price does not change)

Define Change in Demand :

caused due to a change in the price

Define Movement along a demand curve :

price does not change

A change in demand :

1. Taste
2. Income
3. Price related goods
4. Expectations

Events that can influence a shift in demand : (Listing)

an increase in demand when income rises or a decrease in demand when income decreases describe a normal good (buy this when you have more money)

Define a Normal Good :

an increase in demand when income decreases or a decrease in demand when income increases (substitute, less expensive)

Define an Inferior Good :

buying combo meal at a fast food place

Example of a normal good:

buying off the $1.00 menu at a fast food place Example of an inferior good: it just means it is less expensive Inferior does not mean the item is not good : inferior good When you buy the store brand instead of the name brand, that is an : it costs less Sometimes the store brand is better but it is considered an inferior good because : when an increase in the price of one of the goods leads to an increase in the demand for the other good Define Substitutes : price of coke goes up so you buy pepsi What is an example of a substitute : when two goods are consumed together and an increase in the price of one of the goods leads to a decrease in the demand for the other good. Define complements : increase in the price of syrup leads to a decrease in the demand for pancakes What is an example of a complement : storm- so everybody fills up with gas, goes to the store and buys food for the next two weeks Give an example of Customer Expectations : (more buyers = higher demand) Give an example of a Number of Buyers : a measure of how strongly consumers respond to a change in the price of a good (calculated as the percentage change in the quantity demanded divided by the percentage change in price) Define Elasticity of demand : when consumers respond to a change in price with a relatively large change in the quantity demanded Define Elastic : luxuries (vacation), availability of a close substitute (price of oranges double so you buy tangerines) What are Examples of items that would be elastic : when consumers respond to a change in price with a relatively small change in the quantity demanded Define Inelastic : Necessities such as medication needed to live - no matter the cost, If there is not a substitute you will buy it so it is inelastic What are Examples of items that would be inelastic: inelastic If you were going into business it would be better to produce goods that were __________ - even if the price goes up - consumer will still demand the product ... LOOK AT THE CHAPTER 4 PDF MRS.PICKEN POSTED ON GOOGLE CLASSROOM WITH THE SLIDES FOR A BETTER UNDERSTANDING OF THE CHAPTER AND THE GRAPHS/CHARTS !!! B) change in the price of the good Which of the following factors cause a movement along the demand curve? A) change in the prices of related goods B) change in the price of the good C) change in the population D) Both a change in the price of an input E) change in the popularity of the go C) Air travel is a normal good and vacation travel by car is an inferior good When the economy suffers a downturn, vacationers are more likely to take car trips than to fly. Which of the following provides the most reasonable explanation for this phenomenon? A) Air travel and vacation travel by car are complementary goods B) Air tr C) decrease the demand for good A If goods A and B are substitutes, a decrease in the price of good B will : A) increase the demand for good A B) increase the demand for good B C) decrease the demand for good A D) increase the quantity of good B demanded and increase the quantity of good C) when income increases, the demand increases A good is normal if : A) when income increases, the demand remains unchanged B) when income increases, the demand decreases C) when income increases, the demand increases D) income and the demand are unrelated E) when income decreases, the demand increase B) when income increases, the demand decreases A good is inferior if : A) when income increases, the demand remains unchanged B) when income increases, the demand decreases C) when income increases, the demand increases D) income and the demand are unrelated E) when income decreases, the demand decrea E) B to A Use "Demand for Coconuts" Figure 5-1. If a coconut is a normal good and the price of coconuts increases, then the movement that would take place in the model could be : A) A to B B) B to E C) C to A D) E to B E) B to A A) A to C Use "Demand for Coconuts" Figure 5-1. If fish is a substitute good for coconuts and the price of fish increases, then the movement that would take place in the model could be : A) A to C B) B to A C) C to A D) B to E E) A to B C) C to A Use "Demand for Coconuts" Figure 5-1. If coconuts are considered a normal good and the overall income level of consumers is falling, then the movement that would take place in the model could be : A) A to C B) B to A C) C to A D) E to B E) A to B A) A to C Use "Demand for Coconuts" Figure 5-1. If there is an overall increase in taste and preference for coconuts, then the movement that would take place in the model could be : A) A to C B) B to A C) C to A D) B to E E) A to B B) complements When the price of gas goes up and the demand for tires goes down, this means tires and gas are : A) substitutes B) complements C) both expensive D) both inexpensive E) inferior goods B) shifts to the left If steak and potatoes are complements, when the price of steak goes up, the demand curve for potatoes : A) shifts to the right B) shifts to the left C) stays the same D) shifts to the right and then moves back E) will get steeper and shift to the right E) a decrease in the demand for beef Given that chicken and beef are substitute goods, if the price of chicken decreases substantially, there would be: A) an increase in the demand for beef B) an increase in the supply of chicken C) an increase in the quantity demanded for beef D) no change B) consumer expectations An increase in the demand for gasoline today caused by concerns that gasoline prices will be higher tomorrow is most likely attributable to which of the following? A) income B) consumer expectations C) consumer preferences D) prices of other goods E) prod C) As the price of a DVD rental rises, fewer DVDs are rented Which of the following is likely to cause a rightward shift in the demand? A) As income taxes rise, fewer new cars are purchased B) As the price of corn rises, more acres of corn are planted C) As the price of a DVD rental rises, fewer DVDs are rented D) D) a larger population Which of the following is likely to cause a rightward shift in the demand for home-delivered pizza? A) a lower price of pizza B) a lower price of fast food hamburgers C) a higher price of pepperoni D) a larger population E) a lower price of pepperoni C) loaves of bread and hamburger buns Which of the following describe two goods that are most likely substitutes in consumption? A) loaves of bread and sticks of butter B) loaves of bread and toasters C) loaves of bread and hamburger buns D) loaves of bread and peanut butter E) loaves of brea C) an increase in the quantity demanded along a given demand curve A decrease in the price of a good will result in : A) an increase in demand (a rightward shift in the demand curve) B) an increase in supply (a rightward shift in the supply curve) C) an increase in the quantity demanded along a given demand curve D) an i C) 25 Use Table 5-1. If the price of chocolate covered peanuts is$0.60 the quantity demanded by George is _____ bags per month.
A) 10
B) 15
C) 25
D) 30
E) 120

C) $0.70 Use Table 5-1. If Barbara is only able to purchase 20 bags of chocolate covered peanuts, the maximum price she is willing and able to pay for each bag is _________ A)$0.90
B) $0.80 C)$0.70
D) $0.60 E)$0.50

C) 105

Use Table 5-1. If George, Barbara, and Dan are the only three buyers in the market, and the price of a bag of chocolate covered peanuts is \$0.80, the total market demand is ______ bags per month.
A) 70
B) 80
C) 105
D) 280
E) 15

Market Demand

take all the individuals and pull them together