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What’s Happening with Demand

Explore the factors determining elasticity of demand, such as substitutes, budget importance, and time period. Learn about income effect, substitution effect, and diminishing marginal utility influencing consumer behavior in microeconomics.

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What’s Happening with Demand

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  1. What’s Happening with Demand Chapter Four Test Review

  2. Elasticity where a change in the independent variable (usually price) generates a proportional change dependent variable (quantity demanded or supplied). Unit Elastic

  3. What are the three reasons for the L law of demand? • Income Effect • Substitution Effect • Diminishing Marginal Utility

  4. The three factors that determine whether a product’s demand is elastic or inelastic. a) Are their close substitutes available. If yes then elastic. If no then inelastic. b) How important it is to your household budget. If it is expensive, then it is elastic. If it is cheap, then it is inelastic. c) The period of time involved. If its short-term, people tend to be inelastic. Over time they adjust and can be elastic.

  5. People get less usefulness or satisfaction as they consume more and more of a product. Diminishing Marginal Utility

  6. Type of elasticity where the percentage change in an independent variable (usually price) results in a larger change in the dependent variable (usually quantity demanded or supplied). Elastic

  7. Movement along a stable demand curve showing that a different quantity is purchases in response to a change in price of that product. Change in Quantity Demanded

  8. and ability to buy Willingness at a given price Demand

  9. Consumer demand for differentaccounts at every price thatmake the demand curve shift left of right. Shown by a shift of the entire demand curve. Right for an increase and left for a decrease. Change in Demand

  10. Tastes and Preferences, Related Goods, Income, population, and expectations Shifts the entire demand curve TRIPE or factors that cause a Change in Demand

  11. The portion of a change in quantity demanded that is caused by a change in price that makes other products less costly. Substitution Effect

  12. Branch of economic theory that deals with behavior and decision making by small units such as individuals and firms. Microeconomics

  13. Measure of responsiveness that tells us how a dependent variable, such as quantity, responds to a change in an independent variable, such as price. Elasticity

  14. When the price of a product decreases I buy more quantity. When the price rises I buy less quantity. An inverse relationship. Law of Demand

  15. Type of elasticity where the percentage change in an independent variable (usually price) generates a causes a less than proportionate change in the dependent variable (quantity demanded or supplied) Inelastic

  16. The portion of a change in quantity demanded that is caused by a price change. This has nothing to do with one’s pay or income. Income Effect

  17. Increase in Demand P S p1 p D1 D Q q q1 D  .: P ↑ & Q ↑

  18. Decrease in Demand P S p p1 D D1 Q q1 q D  .: P↓ & Q↓

  19. When demand increases: The demand curve shifts_____. rightward Equilibrium price and quantity ______ increase

  20. Increase in Demand P S p1 p D1 D Q q q1 D  .: P ↑ & Q ↑

  21. When demand decreases: The demand curve shifts_____. leftward Equilibrium price and quantity ______ decrease

  22. Decrease in Demand P S p p1 D D1 Q q1 q D  .: P↓ & Q↓

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