La vida es sueño

QUESTIONNAIRE FOR CHAPTER FOUR
'DEMAND'

SECTION ONE

What does the Law of Demand state?

Every product or service, higher prices are associated with a smaller amount demanded.
How is achange in quantity demanded shown on the demand curve?
The quantity decreases because the quantity demanded is lower.
What is marginal utility ?
The extra usefulness or satisfaction a person getsfrom acquiring or using one more unit of a product.

SECTION TWO

How does the income effect change the quantity demanded?

When a prices drop, consumers pay less for the product and as a resultthey buy less prodcet (less quantity)
What causes the substitution effect?
Is when a price of a product decreases, consumers will buy more products because of that.
How is a change in demand shownon the demand curve?
If the price goes up the quantity goes down.
What are factors that cause a change in demand?
The price of the product causes a change in demand.
What is the difference betweensubstitutes and complements?
Substitutes are products that can be used in place of others, and complements are when the use of one product increases, the use of the complement increases too.SECTION THREE

What is the difference between elastic and inelastic demand?

Elastic is when a given change in price causes relatively larger change in quantity demanded, and inelastic is when causesrelatively shorter change in quantity.
What is the purpose of the Total Expenditure Test?
Estimate elasticity.
How is the total expenditure determined?
Multiplying the price of a product by thequantity demanded for any point along the demanded curve.
What does the Total Expenditure Test show when the price is lowered on a product that has an elastic demand?
The quantity goes down.
Whatdoes the Total Expenditure Test show when the price is lowered on a product that has an inelastic demand?
The quantity goes up.
What does the Total Expenditure Test show when the price is lowered on...