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14 Cards in this Set
- Front
- Back
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Define Law of Demand:
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your willingness to pay to consume given the economic environment: The price & quantity demanded of a good are inversely related
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FC#5: Explain the diagram below as it pertains to the law of Demand: use the points and define D.
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If the price is $10 - your willing to buy 2 sandwiches. If price is $3, then buy 8 sandwhiches, etc.
D = demand curve |
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Define change in quantity demanded
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A movement along the demand curve caused by a change in price: If price changes, then your willingness to pay to consume changes
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FC#6: Explain the following graph as it pertains the changes in price and the law of demand:
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PRICE CHANGE ONLY: called change in QUANTITY demand. Economy moves ALONG SAME DEMAND CURVE.
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If the price decreases, then what is your willingness to buy?
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increases - called increase in quantity demanded
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If price increases, then what is your willingness to buy?
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decreases - called decrease in quantity demanded
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*CRITICAL POINT* A change in price is a change in quantity demand meaning?
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price changed!
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FC#7: Explain the graph below as it pertains to changesin demand Environment
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1. Willingness to pay more for same quantity.
2. Due to enviro change, you are willing to buy more at same price 3. Whole new demand curve with change is enviro *Notice word "quantity" is missing when enviroment changes |
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What are demand enviroments
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1. preference
2. Income 3. # of buyers 4. Price of other goods you could consume |
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Explain normal and inferior goods as it pertains to income of the demand environment
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1)normal good - income up, demand up (steak)
2)inferior good - income up demand down (bolagna) |
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Explain the price of other goods you can consume (substitue & complements) as it pertains to the demand of environment
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1. substitute: as price of good 1 increases, quantity of good 2 consumed increases. (Pepsi & Coke)
2. As price of good 1 increases, quantity of good 2 consumed decreases (ice cream & hot fudge) |
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FC#8: suppose Pepsi runs a sale and the price of Pepsi goes down: explain the graph below as it pertains to substitues:
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Price drops and people consume more. PRICE CHANGE. A change or increase in QUANTITY demanded.
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FC#9: suppose Pepsi runs a sale and the price of Pepsi goes down: explain the graph below as it pertains to substitues:
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Price of Coke didn't change, but consumers consume less Coke at same price as tehy substitute cheap Pepsi for Coke. ENVIRONMENT CHANGES. A change, decrease, in Demand.
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If you expect price to increase in future, how does it effect demand today?
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changes demand today: EG: did you fill up your gas tank on June 30 before the new gas tax went into effect July 1?
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