Chapter 4 Econ

desire to own something and the ability to pay for it

• demand

• demand

• income effect

• income effect

What does the Law of Demand state?

• When consumers react to an increase in the good’s price by consuming less of that good and more of other goods

• consumers buy more of a good when its price decreases and less when its price increases

• consumers buy more of a good when its price decreases and less when its price increases

• When consumers react to an increase in the good’s price by consuming less of that good and more of other goods

What were the two reasons explaining the Law of Demand?

• negative effect and demand effect

• substitution effect and income effect

• negative effect and demand effect

• substitution effect and income effect

What is a demand schedule?

• table that explains why people will want to buy more goods

• table that explains why people will want to buy more goods

• A table that lists the quantity of a good a person will buy at each different price

• A table that lists the quantity of a good a person will buy at each different price

What is a Demand Graph/Demand Curve?

• A graphic representation of a demand schedule

• A table that lists the quantity of a good a person will buy at each different price

• A graphic representation of a demand schedule

• A table that lists the quantity of a good a person will buy at each different price

What two things are important to remember about a Demand Graph/Demand Curve?

• The graphs shows only how many goods are sold and it always slopes upward - it has a positive slope

• The graph only shows the relationship between price of this good and the quantity and The demand curve on the graph slopes downward…it will always have a negative slope

• The graph only shows the relationship between price of this good and the quantity and The demand curve on the graph slopes downward…it will always have a negative slope

• The graphs shows only how many goods are sold and it always slopes upward - it has a positive slope

What does the ceteris paribus assumption have to do with?

• keeps all factors constant except one thing, helps isolate the effect of one variable on an economic outcome (like how does changing the price affect how much is sold while everything else stays the same)

• it looks at multiple factors in the economy and how changing multiple things can affect the economic outcome (like how much money is made)

• it looks at multiple factors in the economy and how changing multiple things can affect the economic outcome (like how much money is made)

• keeps all factors constant except one thing, helps isolate the effect of one variable on an economic outcome (like how does changing the price affect how much is sold while everything else stays the same)

What changes the quantity demanded?

• change in price

• quality of the product

• quality of the product

• change in price

What are the 5 Non-price Determinants of Demand?

• income, preferences (tastes and advertising), population, prices of related goods, consumer's expectations

• price of the product, preferences, taxes, consumer reviews, income

• income, preferences (tastes and advertising), population, prices of related goods, consumer's expectations

• price of the product, preferences, taxes, consumer reviews, income

How does income affect demand?

• when you have more money, you spend more money on normal things

• when you have more money, you spend more money on normal things

• when you have more money, you save more of it

• when you have more money, you save more of it