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ECON 103 Chapter Notes - Chapter 5: Demand Curve, Normal Good, Substitute Good

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magentamoose283
18 Oct 2015
School
Simon Fraser University
Department
Economics
Course
ECON 103
Professor
Douglas Allen

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Document Summary

5. 1. 1 change in demand is a shift in the demand curve. shifts to the right demand increases and shifts to the left demand decreases. 5. 1. 2 changes in demand result from exogenous parameters (income, price of other goods and tastes or preferences) 5. 1. 3 having di erent tastes means that we have di erent marginal values. 5. 1. 4 the height of the demand curve is the marginal value. 5. 1. 5 an increase in the taste for some good would lead to an increase in the demand for the good. 5. 1. 6 if there is a change in income the change in demand depends on the nature of the good (normal or inferior) 5. 1. 7 normal goods - when income increases the demand for the normal goods also increases. 5. 1. 8 inferior goods - when income increases the demand for the inferior goods decreases.

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Related Questions

Which of the following is true?
a. The demand curve for a good shift leftward when the price of a substitute rises.
b. If consumers expect the price of a good will rise in the future, the demand curve shifts leftward.
c. An increase in population shifts the demand curve for most goods leftward.
d. For an inferior good, when income increases, the demand curve shifts leftward.
 
1. When demand is inelastic, a decrease in price will cause
 
a. an increase in total revenue.
b. a decrease in total revenue.
c. no change in total revenue but an increase in quantity demanded.
d.no change in total revenue but a decrease in quantity demanded.
 
2. For which of the following types of goods would the income elasticity of demand be positive and relatively large?
 
a. all inferior goods
b. all normal goods
c. goods for which there are many complements
d. luxuries
 
3. Which of the following should be held constant when calculating the income elasticity of demand?
 
a. the quantity of the good demanded
b. the price of the good
c. income
d. All of the above should be held constant.
 
4. Suppose goods A and B are substitutes for each other. We would expect the cross-price elasticity between these two goods to be
 
a. positive.
b. negative.
c. either positive or negative. It depends on whether A and B are normal goods or inferior goods.
d. either positive or negative. It depends on whether the current price level is on the elastic or inelastic portion of the demand curve.
 
5. As the price elasticity of supply increases, the supply curve
 
a. becomes flatter
b. becomes steeper
c. becomes downward sloping.
d. shifts to the right.

 

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.