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ECON 101 Lecture Notes - Lecture 4: Demand Curve, Normal Good, Inferior Good

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fuchsiapug261
28 Mar 2019
School
U of M
Department
Economics
Course
ECON 101
Professor
Benjamin Zamzow

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ECON 101 Full Course Notes
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ECON 101 Full Course Notes
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Document Summary

Use the individual demand curve to construct market demand. Understand how changing market conditions shift the demand curve. Distinguish between movements along a demand curve and a shift in the demand curve. Individual demand - the quantity one person demands, at each price. Market demand - the total quantity demanded by the market at each price. Survey your customers - ask them about the quantity they demand at each price. Add up the total quantity demanded - yielding the total quantity demanded at each price. Scale the quantities demanded by the survey respondents, so that they represent the whole market. Multiply survey demanded by (size of the market)/(size of the survey) Plot the market demand curve - the total quantity demanded by the market at each price. Law of demand - the quantity demanded is higher when prices are lower. When the price is lower, the quantity demanded is higher, implying the demand curve is downward sloping.

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Related Questions

In the table below, individual demand schedules for Tex, Dex, and Rex are shown in addition to total market demand.

Fill in the missing values in this table.

Price

Tex
Qd

Dex
Qd

Rex
Qd

Total Quantity
Demanded

$8

3

3

2

  

7

5

4

  

15

6

  

5

10

22

5

9

  

14

29

4

11

7

18

  


a. Which buyer (Tex, Dex, or Rex) demands the most at a price of $7?

b. Which buyer's quantity demanded increases the least when the price is lowered from $7 to $6? 

c. Which direction would the market demand curve shift if Tex withdrew from the market? 

d. What if Dex doubled his purchases at each possible price?

e. Suppose that at a price of $6, the total quantity demanded increases from 22 to 32 units. Is this a 'change in the quantity demanded' or a 'change in demand'? 

The market demand curve

a. slopes upward.

b. is found by vertically adding the individual demand curves.

c. represents the sum of the quantities demanded by all the buyers at each price of the good.

d. represents the sum of the prices that all the buyers are willing to pay for a given quantity of the good.

When we move along a given demand curve,

a.

all nonprice determinants of demand are held constant.
b.

only price is held constant.
c.

all determinants of quantity demanded are held constant.

d. income and price are held constant.

When the price of a good or service changes,

a.

there is a movement along a given demand curve.
b.

the demand curve shifts in the opposite direction.
c.

the supply curve shifts in the opposite direction.
d.

the demand curve shifts in the same direction.

1 an imperfect market, individual firms

A.are always able to set the price of their product.
B.are able to influence the price of their product.
C.have no influence over the price of their product.

D.take the market price as given.

1 Which of the following is NOT characteristic of a market economy?

Significant government intervention
Little or no government intervention
Buyers and sellers motivated by self-interest
Prices determined by demand and supply

2 In a competitive market, the price of the product is

independently set by each competing seller.
set by the market leader and then copied by other sellers.
jointly set after a meeting of all sellers in the market.
set by market supply and demand.

3 Which of the following firms participates in a competitive market?

A new car manufacturer, such as Ford, Honda, Toyota, or GMC
A software producer, such as Microsoft
A corn farmer
A local electric utility company

4 In an imperfect market, individual firms

are always able to set the price of their product.
are able to influence the price of their product.
have no influence over the price of their product.
take the market price as given.

5 Which of the following firms operates as a monopoly?

A car manufacturer
A local water utility
A corn farmer
A fish vendor at a neighborhood market

6 According to the law of demand, what is the relationship between price and quantity demanded?

Direct
No relationship
Inverse

7 Refer to the following graph. The demand curve slopes downward because
Click to view graphic. (Links to an external site.)

prices and quantity demanded move in opposite directions.
prices and quantity demanded move in the same direction.
prices and quantity demanded have no relationship.
prices and quantity demanded remain unchanged.

8 A change in which of the following will cause a change in the quantity demanded of coffee?

Consumer income
The price of green tea, a substitute for coffee
The number of coffee consumers
The price of coffee

9 Suppose that burgers and fries are complements in consumption. If the price of fries increases

overall demand for burgers will increase.
overall demand for burgers will decrease.
quantity demanded for burgers will increase.
quantity demanded for burgers will decrease.

10 Suppose that Coca Cola and Pepsi are substitutes in consumption. If the price of Coca Cola decreases, then

both the equilibrium price and the quantity of Pepsi demanded will decrease.
both the equilibrium price and the quantity of Pepsi demanded will increase.
the equilibrium price of Pepsi will increase and the quantity demanded of Pepsi will decrease.
the equilibrium price of Pepsi will decrease and the quantity demanded of Pepsi will increase.

11 According to the law of supply, what is the relationship between price and quantity supplied?

Direct
No relationship
Inverse
It depends on the change in price

12 Refer to the graph below. The supply curve is _______________ driven by the law of supply.
Click to view graphic. (Links to an external site.)

Downward sloping
Upward sloping
Perfectly vertical
Perfectly horizontal

13 A change in which of the following will cause a change in the quantity supplied of coffee?

The technology or the production process of making coffee
Anticipation of a change in the price of coffee
The wages of coffee bean pickers
The price of coffee

14 Which of the following will cause a rightward shift in the supply curve for tobacco?

A fall in the number of tobacco farmers in the market
An increase in taxes on tobacco
Removal of government subsidies to tobacco farmers
An improvement in the technology used in the production of tobacco

15 Flour is a factor of production of cupcakes. How will an increase in the price of flour affect the market for cupcakes?

Overall supply will increase
Overall supply will decrease
Quantity supplied will increase
Quantity supplied will decrease

16 Refer to the following image. When a market is in equilibrium, which of the following is true?
Click to view graphic. (Links to an external site.)

Quantity supplied exceeds quantity demanded
Quantity supplied is less than quantity demanded
Quantity supplied is equal to quantity demanded
There is no relationship between quantity supplied and quantity demanded

17 Refer to the following figure. At a price of $15, this market is experiencing a(n)
Click to view graphic. (Links to an external site.)

equilibrium.
shortage.
surplus.
none of the above are true.

18 Refer to the following figure. At a price of $5, this market is experiencing
Click to view graphic. (Links to an external site.)

equilibrium.
a shortage.
a surplus.
None of the above are true.

19 Suppose pasta salad is a normal good. If the price of pasta (a major ingredient in pasta salad) increases and income also increases, the

equilibrium quantity and equilibrium price of pasta salad will increase.
equilibrium quantity of pasta salad will decrease and the equilibrium price of pasta salad may either increase or decrease.
equilibrium quantity of pasta salad may either increase or decrease and the equilibrium price of pasta salad will increase.
equilibrium quantity and equilibrium price of pasta salad will both decrease.

20. What must happen to the market price in order for a shortage to be eliminated?

Price must fall.
Price must rise.
Price must stay the same.
Price may rise or fall depending on the size of the shortage.