1. Chapter 4 Section 1

2. Definitions
Law of demand-when a goods price is lower people will buy more of the good.
Substitution Effect- when consumers react to an increase in a goods price by consuming less of that good and more of other goods.
Income effect- the change in consumption that comes as a result in change in real income.

3. Definitions
Demand schedule- a table that lists the quantity of a good a person will buy at each different price.

4. Definitions
Demand curve- A graphic representation of demand schedule. The curve works from left to right in a downward fashion.

5. Notes Market demand schedule Price of a slice of pizza
Quantity demanded per day
$.50
300
$1.00
250
$1.50
200
$2.00
150
$2.50
100
$3.00 50

6. A Shift in demand
A demand curve is accurate only as long as there are no changes other than the price that could effect the consumers decision.

7. Changes in Demand
A change in quantity demanded caused by a change in price is shown as a movement along a demand curve. The curve does not shift. When factors other than price cause demand to fall, the demand curve shifts to the left. An increase in demand appears as a shift to the right.

8. Definitions
Normal Goods-a good that consumers demand more of when their incomes increase.
Inferior Goods-a good that consumers demand less of when their incomes increase.

9. Demand curves can also shift because of changes other than prices.
NOTES
Demand curves can also shift because of changes other than prices.

10. Consumer Expectations
Our expectations about the future can affect our demand for certain goods today.

11. Population Trends
Changes in the size of the population will also affect the demand for most products

12. Complements- two goods that are bought and used together
Substitutes- goods used in place of one another

13. Advertising and publicity play a role in what we buy
Advertising is a factor that shifts demand curves

14. Demand for selected goods$5
$10
$15
Students
Parents
Movie Ticket 70 67 11 35 1
Asthma Medicine 91 94 86 88 79 85
Restaurant Meal 96 62 80 13 37

15. Define and give an example of the income effect.
Questions
Define and give an example of the income effect.
the change in consumption in result in change in real income.

16. What are three characteristics of a demand curve?
Questions
What are three characteristics of a demand curve?
The quantity, the quality and what it is.

17. What is income effect? Questions
the change in consumption in result in change in real income.

18. What does the law of demand say about lower prices?
Questions
What does the law of demand say about lower prices?
They sale more.

19. What are two ways a consumer can change his or her spending pattern?
Questions
What are two ways a consumer can change his or her spending pattern?
By what they buy.

20. What is a demand curve? Questions
A graphic representation of demand schedule.

21. Why can a sale encourage consumers to buy more?
Questions
Why can a sale encourage consumers to buy more?
Because the prices are lower.

22. Explain the law of demand?
Questions
Explain the law of demand?
when a goods price is lower people will buy more of the good.

23. What is substitution effect?
Questions
What is substitution effect?
when consumers react to an increase in a goods price by consuming less of that good and more of other goods.

24. What is a market demand schedule?
Questions
What is a market demand schedule?
a table that lists the quantity of a good all consumers in a market will buy at every different price.

25. What would happen to a product or good if the price increases?
Questions
What would happen to a product or good if the price increases?
The demand is lower.