Chapter 4 Section 2 & 3: What Factors affect Demand? and Wha

It is the change in the amount that consumers will buy because the purchasing power of their income changes

• o Substitution effect

• o Income effect

• o Law of diminishing marginal utility

• o Change in demand

It is an increase or decrease in the amount demanded because of change in price.

• o Change in demand

• o Income effect

• o Law of diminishing marginal utility

• o Change in quantity demand

Goods consumer demand less of when their income rises.

• o Normal goods

• o Inferior goods

• o Substitutes

• o Change in quantity demand

How is change in quantity demanded related to the law of demand?

• o Each point reflect the quantity demanded at a particular price

• o The law of demand states that change in quantity demanded has an inverse relationship to price

• o It prompts consumers to buy different products

• o Because it is a part of a mixed economy

It states that the marginal benefit of using each additional unit of product during a given period will decline.

• o Change in demand

• o Income effect

• o Law of diminishing marginal utility

• o Change in quantity demand

They are goods that consumers demand more of when their income rise.

• o Normal goods

• o Inferior goods

• o Law of diminishing marginal utility

• o Change in quantity demand

Why do substitutes affect both demand and elasticity of demand?

• o Because in both cases substitutes offer consumers a choice, if the price of a particular good rises , to switch to something else

• o Because there are no complements for the goods provided

• o Demand curve is steep and is always changing with the price

• o It has no substitute

Demand is unit elastic when the percentage change in price and quantity demanded are the ____________.

• o unequal

• o same

• o challenges faced today

• o neutral

Demand is _____________________ if quantity demanded changes significantly as price changes

• o elastic

• o inelastic

• o normal

• o inferior

Demand is _____________________ if quantity demanded changes little as price changes

• o elastic

• o inelastic

• o normal

• o inferior