Chapter 4 Summary  Research Paper Subtitle Placeholder

Chris Hughes  

Nic Hart

Economics

Mr. Treaddork

Overview
 
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Key Terms

• Demand-refers to the willingness and ability of buyers to purchase different quantities of a good at different prices during a specific time or period
• Law of Demand-as the price of a good increases, the quantity demanded of the good decreases
• Quantity-refers to the number of units of a good purchased at a specific price
• Law of Diminishing Marginal Utility-states that as a person consumes additional units of a good, eventually the utility or satisfaction gained from each additional unit of the good decreases
• Demand Schedule-numerical representation of the law of demand
• Demand Curve-graphic representation of the law of demand
• Normal Good-when a demand and income change in the same direction
• Inferior Good-income and demand go in different directions
• Neutral Good-when a person buys the same amount of the good when income changes
• Substitutes-a similar good. with substitutes, the price of one and the demand for the other move in the same direction
• Complement-a good that is comsumed jointly with another good. with complements, the price of one and the demand for the other move in opposite directions
• Elasticity of Demand-the relationship between the percentage change in quantity demanded and percentage change in price
• Elastic Demand-the type of demand that exists when the percentage change in quantity demanded is greater than the percentage change in price
• Inelastic demand-the type of demand that exists when the percentage change is quantity demanded is less than the percentage change in price
• Unit-elastic demand-the type of demand that exist when the percentage change in quantity demanded is the same as the percentage change in price 

 
Market Demand for PTHS  
 



1. Does the law of demand hold true?
    Yes, the higher the price of a dvd the less dvd's they want.

2. What is the elasticity of demand?
    It is the relationship between price and quantity demanded.  If a good is sensitive to a change in price than it is elastic.  If a good is inelastic, then as the price increases, the total revenue increases.  Inelastic goods do not change in quantity demanded as the price changes. In our survey, the elasticity of demand is 68%.

3. Is it elastic, inelastic, or unit elastic?
    elastic.

4. What is the total revenue for each example?  Which option is the best if you wanted the best profit maximizing option?
   $3.00 - $105
   $2.50 - $130
   $2.00 - $190 MAXIMUM PROFIT
   $1.50 - $171
   $1.00 - $155

5. Are there any products that are complements or does it have any substitutes? If so, what are they?
   No.

6. Is this product a normal good or an inferior good?    A normal good.




7. To be considered demand, the consumer must be willing and able to buy a product.




8. Does the law of diminishing marginal utility hold true in this example? Why or why not?

9. Does the income effect have any influence on the market demand at PTHS? Explain.
   Yes, because not every high school student has extra money to spend.

10. Explain the difference between demand and quantity demanded.
   Demand is the willingness and ability to purchase something while quantity demanded is the number of units purchased.

11. The law of demand states:
   as the price of a good increases, the quantity demanded of a good decreases.

12. What did you learn from this activity?
   we learned how to figure elasticity of demand and how to form a survey