ECO 1104 Lecture Notes - Lecture 4: Segway Pt, Normal Good, Inkjet Printing

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9 Nov 2017

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Purpose - to analyze the allocation of the production of goods and services across industries of the economy. D = f (price; consumer preferences, income, prices of related goods, expectations of future price and/or income) Ceteris paribus - an inverse relationship between price and quantity demanded: as price increases, qd decreases, as price decreases, qd increases. C. p. means all other factors except price held constant. Geometrically, this gives us a negative slope for the demand curve. Shifts in the demand curve: denotes a new relationship between qd and p, depicted in the following graph, caused by a change in those relevant factors other than price. I(cid:374)ter(cid:374)et (cid:373)usic vs cds or taxi drivers" vs uber: price of good b increases, demand for good a increases, price of good b decreases, demand for good a decreases. Complements: ex. ipods, mp3 players, itunes, price of good b increases, demand for good a decreases, price of good b decreases, demand for good a increases.

Related Questions

What is aggregate demand?

What is Aggregate Demand?

Aggregate Demand refers to the total expenditure on domestic goods and services within an economy. The Aggregate Demand (AD) thus represents the relationship between the total quantity of output demanded in the economy and the overall price level. Like the basic demand curve, the AD curve also slopes downward to reflect the inverse relationship between aggregate price and aggregate quantity demanded.

Any point along the market demand curve shows

1. the quantity of the good that firms would be willing and able to supply at a specific price

2. the relationship between the price of the good and total quantity demanded at a series of prices

3. the opportunity cost of supplying a given quantity of goods to the market

4. the quantity of the good that consumers would be willing and able to purchase at a specific price

5. how population changes affect the quantity demanded at a specific price

purplewhale646

When demand for a good is very elastic, revenue ________ when the price falls.

(2)

An elasticity measure less than one means that demand is __________.

(3)

An elasticity measure greater than one means that demand is __________.

(4)

The Latin expression ceteris paribus means

	having made all other necessary changes.
	holding constant all other variables.
	assuming all households have similar incomes.
	given the level of income in the economy.

(5)

A variable measured in terms of money is called a ____________________.

	real variable
	nominal variable
	macroeconomic variable
	microeconomic variable

(6)

Which of the following is true about the importance of money in economics?

	Money is important in both macroeconomics and microeconomics.
	Money is important in macroeconomics but not microeconomics.
	Money is important in microeconomics but not macroeconomics.
	Money is not important in either microeconomics or macroeconomics.

(7)

What is the difference between normative and positive economics?

	Positive economics is descriptive and predictive; normative economics is prescriptive.
	Positive economics highlights the positive aspects of the economy; normative economics highlights the average features.
	Positive economics studies the actions of individuals; normative economics studies the actions of households.
	Positive economics is an applied social science; normative economics is a theoretical social science.

(8)

The slope of the demand curve is negative because

	the quantity of a good demanded decreases as income declines.
	the quantity of a good demanded increases as income declines.
	the quantity of a good demanded increases as the price declines.
	the quantity of a good demanded decreases as the price declines.

(9)

What is the result of an increase in the price of bread, a normal good?

	The demand curve shifts to the right.
	The demand curve shifts to the left.
	The quantity demanded increases.
	The quantity demanded decreases.

(10)

What is the effect on demand for bread when the price of bagels, a substitute for bread, rises?

	The demand curve for bread shifts to the right.
	The demand curve for bread shifts to the left.
	The quantity of bread demanded increases.
	The quantity of bread demanded decreases.

(11)

Which of the following would cause the supply curve for bread to shift inward?

	An increase in the price of bread
	An increase in the price of bagels
	A decrease in the price of bread
	An increase in the price of flour

(12)

An improvement in technology shifts the supply curve outward because

	at every price, firms find producing the good to be more profitable.
	the price of the good increases.
	at every price, firms find producing the good to be less profitable.
	the price of the good decreases.

(13)

Which of the following factors does not affect how much bread a baker is willing to produce?

	The price of bread
	The demand for bread
	The cost of inputs
	Technology

(14)

How do expectations of prices affect how much of a good producers are willing to sell?

	Expectations of prices affect only demand, not supply.
	Actual prices, not expectations of prices, affect supply.
	If producers expect prices to fall in the future, they supply less at every price.
	If producers expect prices to rise in the future, they supply less at every price.

(15)

When the price of a good is above equilibrium level,

	the quantity demanded exceeds the quantity supplied.
	the quantity supplied exceeds the quantity demanded.
	the supply curve shifts to the left.
	the supply curve shifts to the right.

(16)

At a price of P₀ in the diagram below, which of the following statements is true?

	Supply equals demand.
	There is excess demand.
	There is excess supply.
	There is scarcity.

(17)

If demand for bread increases at every price, the equilibrium price of bread will

	fall.
	rise.
	remain unchanged.
	depend on income.

(18)

If the demand for bread declines, then

	at the original equilibrium price, there is excess demand.
	at the original equilibrium price, there is excess supply.
	the supply curve shifts to the right.
	the supply curve shifts to the left.

(19)

Peanut butter and jelly are complementary goods. When the price of peanut butter rises, the demand for jelly ________ and the price of jelly ________.

	rises; falls
	rises; rises
	falls; rises
	falls; falls

(20)

The measure of elasticity that economists use is

	always a positive number.
	always a negative number.
	positive when demand is elastic and negative when demand is inelastic.
	negative when demand is elastic and positive when demand is inelastic.

(21)

Which of the following formulas is the correct expression for the slope of a line?

(22)

Graphically how would an increase in income affect the demand for hamburgers?

	The slope of the demand curve would increase.
	The slope of the demand curve would decrease.
	The demand curve would shift outward, parallel to the original demand curve.
	The demand curve would shift inward, parallel to the original demand curve.

(23)

Given the equation P = $6.00 ? $.40Q, where P is the price of the good and Q is the quantity of the good demanded, how many units will this consumer demand if the price is $3.60?

	1.44 units
	3 units
	3.6 units
	6 units

(24)

Which of the following is true about unit elasticity?

	Revenues remain unchanged when the price changes.
	Elasticity of demand increases as one moves down the demand curve.
	Elasticity of demand decreases as one moves down the demand curve.
	The elasticity of demand is greater than one at every point along the demand curve.

(25)

Which of the following could be a determinant of the quantity demanded of a good?

	The price of the good
	The price of related goods
	Income
	Expectations about the future price of the product
	All of the above

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ECO 1104 Lecture Notes - Lecture 4: Segway Pt, Normal Good, Inkjet Printing

ECO 1104 Full Course Notes

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