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Explore the concept of demand, the factors affecting demand elasticity, the relationship between price and total revenue, and the impact of price changes on demand. Discover the answers to crucial questions about consumer behavior and market dynamics.
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Unit 2 Review Demand
What is the term defined as the desire, willingness, and ability to purchase a product at a particular price? Demand
What is the equation for calculating total revenue? • P x Q = TR
When the price of a product increases, what happens to the demand for its compliment? • Shifts to the left or Decreases
What are the Determinants of Demand Elasticity? • Urgency • Availability of adequate substitutes • Proportion of income the purchase requires
What is aggregate Demand? • Market demand or total demand in the economy
Which direction does a demand curve slope? • Downward
Create a demand curve that reflects the substitution effect P D Q
Create a demand curve that reflects the Law of Diminishing Marginal Utility P D Q
Create a demand curve that demonstrates the income effect P D Q
Demand curve that shows what happens to demand for orange juice when lemonade prices drop D2 D1
What’s the economic relationship between a gun and a bullet? Complements
Assuming elastic demand, what happens to total revenue when price increases? Decreases
Demand curve showing a change for olives when the population decreases?
What is the added benefit received from the purchase or use of one more unit of a product? Marginal utility
What do consumers do when marginal utility is lower than price? Stop buying
What elasticity of demand exists for a product without adequate subs but its purchase is considered urgent? • Inelastic
Name the price elasticity: • A 15% change in price results in a 27% change in the quantities demanded • Elastic
Name the elasticity • Price increases 100% causing the quantities demanded to fall from 20 to 10 products • Unit elastic
Name the elasticity: • Quantities demanded decrease 4% following a price hike of 12% • Inelastic
What is the relationship of shoes and socks? • complements
What is the relationship of a flashlight and a battery? • complements
What is the relationship of a dog to a cat? • substitutes
What is the relationship of a car to a motorcycle? • substitutes
What is the likely elasticity of demand for Snickers candy bars? • elastic
What is the likely price elasticity for all PMS medicine? • EXTREMELY inelastic • Haha! • Get it? • Don’t get mad, it’s just a joke!
Create a demand curve indicating the change in demand for pumpkins in October:
Create a demand curve for laptops the week before a huge sale on laptops: D2 D1
Demand for washing machines when immigration laws adjust to allow 12% more immigration:
Demand for washing machines when the recession turns into a depression: D2 D1
Demand for electric fans when the price of air conditioner units decreases 50%: D2 D1
Demand for pretzels when the price of corn nuts falls 45%: D2 D1
Demand for Brittney Spears concert tickets when she announces she’s slashing the prices in half: P D Q
Should an entrepreneur raise or lower prices if demand for the product being sold is inelastic? • raise
If a product had elastic price elasticity, what will happen to total revenue if the price is increased? • TR will decrease
The Law of Demand tells us that quantities demanded will decrease when prices increase. What related question does “elasticity” answer? • By how much will QD decrease?