ECON 200 Lecture Notes - Lecture 2: Economic Equilibrium, Demand Curve

34 views2 pages

erinmole972

4 Feb 2016

School

University of Maryland

Department

Economics

Course

ECON 200

Professor

Robert Schwab

For unlimited access to Class Notes, a Class+ subscription is required.

Document Summary

Change in quantity demanded: movement in demand curve. Change in demand: shifts in demand curve: increase in demand: shifts demand curve to the right, decrease in demand: shifts demand curve to the left. Goods that serve similar enough purposes that a consumer might purchase one in place of the other: ex: coffee and tea. If two goods are substitutes then the increase in price of one good leads to an increase in demand for the other good. Goods that are consumed together so that purchasing one will make consumers more likely to consume the other: ex: dvd players and dvds. Increase in the price of dvds leads to the decrease in demands for dvd players. Goods for which demand increases as income increases. Goods for which demand decreases as income increases. Change in supply: shifts in supply curve. Changes in quantity supplied: movement in shift curve. Equilibrium: a situation in a market when the quantity supply equals the quantity demanded.

Related Questions

When quantity demanded decreases in response to a change in price,

A. the demand curve shifts to the right.
B. the demand curve shifts to the left.
C. there is a movement down along the demand curve.
D. there is a movement up along the demand curve.
E. the supply curve shifts to the right.

The price elasticity of demand is the measure of the responsiveness of the demand for a good to a percentage change in the price of that same good. When the demand for a good changes due to an increase or decrease in the price of the good, it can be said that the good has a price elastic demand. On the other hand, a good whose demand is not significantly affected by a change in the price levels is price inelastic. For example, luxury goods are usually price elastic because these are not something that most people really need. Thus, when the price of luxury goods increases, the demand for such goods falls. Goods that fall within the latter category are usually the basic necessities such as food and prescription medicine. Even when these types of goods become pricier, most people would find ways to afford them because they need those items to survive.

periwinkleraccoon781

The substitution effect of a price change refers to
A) the change in quantity demanded that results from a change in price making a good more
or less expensive relative to other goods that are substitutes.
B) the shift of a demand curve when the price of a substitute good changes.
C) the movement along the demand curve due to a change in purchasing power brought
about by the price change.
D) the shift in the demand curve due to a change in purchasing power brought about by the
price change.