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Unit 2 Review

Explore the concept of demand, the factors affecting demand elasticity, the relationship between price and total revenue, and the impact of price changes on demand. Discover the answers to crucial questions about consumer behavior and market dynamics.

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Unit 2 Review

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  1. Unit 2 Review Demand

  2. What is the term defined as the desire, willingness, and ability to purchase a product at a particular price? Demand

  3. What is the equation for calculating total revenue? • P x Q = TR

  4. When the price of a product increases, what happens to the demand for its compliment? • Shifts to the left or Decreases

  5. What are the Determinants of Demand Elasticity? • Urgency • Availability of adequate substitutes • Proportion of income the purchase requires

  6. What is aggregate Demand? • Market demand or total demand in the economy

  7. Which direction does a demand curve slope? • Downward

  8. Create a demand curve that reflects the Law of Demand P D Q

  9. Create a demand curve that reflects the substitution effect P D Q

  10. Create a demand curve that reflects the Law of Diminishing Marginal Utility P D Q

  11. Create a demand curve that demonstrates the income effect P D Q

  12. Demand curve that shows what happens to demand for orange juice when lemonade prices drop D2 D1

  13. Demand for cars when US incomes drop: D2 D1

  14. Demand elasticity for a Snickers candy bar P D Q

  15. Elasticity of demand for lumber (wood):

  16. What’s the economic relationship between a gun and a bullet? Complements

  17. Assuming elastic demand, what happens to total revenue when price increases? Decreases

  18. Demand curve showing a change for olives when the population decreases?

  19. What is the added benefit received from the purchase or use of one more unit of a product? Marginal utility

  20. What do consumers do when marginal utility is lower than price? Stop buying

  21. What elasticity of demand exists for a product without adequate subs but its purchase is considered urgent? • Inelastic

  22. Name the price elasticity: • A 15% change in price results in a 27% change in the quantities demanded • Elastic

  23. Name the elasticity • Price increases 100% causing the quantities demanded to fall from 20 to 10 products • Unit elastic

  24. Name the elasticity: • Quantities demanded decrease 4% following a price hike of 12% • Inelastic

  25. What is the relationship of shoes and socks? • complements

  26. What is the relationship of a flashlight and a battery? • complements

  27. What is the relationship of a dog to a cat? • substitutes

  28. What is the relationship of a car to a motorcycle? • substitutes

  29. What is the likely elasticity of demand for Snickers candy bars? • elastic

  30. What is the likely price elasticity for all PMS medicine? • EXTREMELY inelastic • Haha! • Get it? • Don’t get mad, it’s just a joke!

  31. Create a demand curve indicating the change in demand for pumpkins in October:

  32. Create a demand curve for laptops the week before a huge sale on laptops: D2 D1

  33. Demand for washing machines when immigration laws adjust to allow 12% more immigration:

  34. Demand for washing machines when the recession turns into a depression: D2 D1

  35. Demand for electric fans when the price of air conditioner units decreases 50%: D2 D1

  36. Demand for pretzels when the price of corn nuts falls 45%: D2 D1

  37. Demand for Brittney Spears concert tickets when she announces she’s slashing the prices in half: P D Q

  38. Should an entrepreneur raise or lower prices if demand for the product being sold is inelastic? • raise

  39. If a product had elastic price elasticity, what will happen to total revenue if the price is increased? • TR will decrease

  40. The Law of Demand tells us that quantities demanded will decrease when prices increase. What related question does “elasticity” answer? • By how much will QD decrease?

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