ECONOMICS
MR. Ammirata
2013
Chapter #4 Review - Demand
Know the following terms:
microeconomics
demand curve
demand
marginal utility
diminishing marginal utility
law of demand
Substitutes
Complements
Determinants (shifters) of Demand
Total Revenue approach to demand elasticity
elastic demand
inelastic demand
unit elastic demand
Know the following terms:
T or F: The demand curve is always downward sloping.
Buying only one instead of two sodas at lunchtime describes what concept?
What conditions must exist in order for there to be demand?
Describe/illustrate what a demand curve looks like.
What factors would cause a change in the quantity demanded for a product?
How does the demand curve respond to an increase in demand? Hint: Think illustration
What factors would cause a change in demand of a product?
A change in the number of consumers can do what to the demand curve?
How is total revenue determined?
What is the relationship between the change in price and total revenue for an elastic demand?
What are the determinants of demand elasticity?
A company decreases the price of a gallon of milk by 10 percent and the company's total revenues fall significantly. What term best describes the demand for milk?
When the manufacturer of a pain medication increases price by 30% the demand for the medication declined by 30%. The demand for pain medication is:
An increase in the price of milk causes a decrease in the demand for cereal. The two products are
Advertising, fashion trends, and new product introductions serve to
Mr. Ammirata’s cheat sheet on demand:
1.) Demand schedule 2) Demand curve
3.) Change in quantity demanded 4.) Change in Demand
5.) Formula to determine elasticity
percent change in quantity demanded = PEOD
percent change in price
6.) Formula to determine % change in P or Q
Step #1
X1 – X2 = Decimal
X1
Step #2
Move the decimal point two places to the right to get % change in P or Q or multiply by 100
7.) Elasticity’s
· Unit elastic = 1 in English: a change in P causes a proportional change in Qd
· Inelastic > 1 in English: a big change in P will result in a small change in Qd
· Elastic < 1 in English: a small change in P will cause a large change in Qd