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