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| State the Law of Demand | The Law of Demand states that the quantity demanded of a good will be greater at lower prices that will be demanded at higher prices as long as other influences remain constant P↓ QD↑ P↑ QD↓ |
| List and explain two reasons for the inverse relationship we see with the law of demand. | Two reasons would be opportunity cost and diminishing marginal utility. Opportunity cost is the cost of the next best alternative use of money, time or resources when one choice is made rather than another. Diminishing marginal utility is decreasing satisfaction or usefulness additional units of a product are acquired. |
| Explain the difference between demand and quantity demanded. | Demand is a combination of desire, ability, and willingness to buy a product. A quantity demand is how much buyers are willing to buy at one particular price. It is one point on the schedule or curve. |
| What causes quantity demanded to change? | An increase and decrease in price |
| List and explain the determinants of demand (These are the factors that shift the curve.) | T=taste; I=Income; M=Market size; E=Expectation for price; R=Related goods; complements and substitutes |
| Explain the difference between a normal good and an inferior good; also give and example of each. | . |
| What is a substitute and what is a complement? Also give an example of each. | A complement is a product that increases the value of another product. A substitute is a completing product that can be used in place of another. |
| Explain the difference between elastic and inelastic demand. | Demand is elastic when a given change in price causes a relatively larger change in the quantity demanded. Demand inelasticity means that a given change in price causes a relatively smaller change in the quantity demanded. |
| Give an example of a good with elastic demand and a good with inelastic demand. | An example for elastic would be hair brushes. An example for inelastic would be gasoline. |
| What is a market? | A market is a meeting place or mechanism allowing buyers and sellers of an economic product to come together. |
