Name_____________________ Per___ Date turned in________
Econ: Chapter:4 Section:1 Date Due: 02_14_Tuesday Page(s)78
Thru 83 Biography: pg.89 (Christy Haubegger)
Data Bank Pages_
Graphs Fig.4.1,4.2,4.3.4.4.,4.5 page(s)79thru 83
Pg___________
Skills for Life: page:84
Global Connection:
Fast Fact pg.80 Case study
page:__________
Objective: After studying this section you will be able to:
A. Explain the law of demand.
B. Understand how the substitution effect and the income effect influence
decisions.
C. Create a demand schedule for an individual and a market.
D. Interpret a demand graph using demand schedules.
Main Idea: according to the law of demand, people buy less of a good when
its price rises. Demand schedules and demand curves illustrate how people
and markets react to different prices.
1. The desire to own something in the ability to pay for it is
called______________-.
2. When a product's price is lower, consumers will buy more of it in
economics we call this the law of________________.
3. When the price of a good increases consumers will buy___________ of it.
4. The law of demand arises from two separate patterns of___________
5. The two effects describe two different ways that consumers change
their___________-- patterns.
6. If you understand these two patterns of behavior you will know why an
increase in price decreases the quantity_____________.
7. The two behavior patterns are the_____________ effect, and
the_______________ effect
The Substitution Effect:
8. If the price of pizza increases to $25 for 10 slices, it is likely that
you will buy less pizza, you might buy a 12 inch Subway sandwich. This is
called what in economics______________
9. What is going to happen to the quantity demanded of Subway sandwiches
since you are now substituting pizza for Subway.__________.
10. The price of pizza decreases to three dollars for 10 slices, you will
now eat more pizza, and, when prices decrease you feel as if your income
has _______________, and when prices increase you feel as if your income
has___________
14. The concept of the income effect is true only if you buy fewer slices
of pizza, because the price of pizza has increased, and you don't increase
your purchase of other foods.
T
F
A Demand Schedule:
15. The quantity demanded of any item is affected by the price of that
item this is called the law of______________
16. In order to have a demand for a good, you must not only want the good
that you must be able to___________- for the good.
17. You could not demand goods when you don't have the ability to pay for
them.
T
F
18. Look at figure 4.3 on page 81. At $.50 a slice how many slices of
pizza is the quantity demanded by Ashley_________ but at three dollars a
slice of pizza what is the quantity demanded by Ashley____________
19. The table illustrated on page 81 listing the quantity of a good that a
person will purchase at each price in market is called a_______________
schedule.
20. Knowing the quantity demanded by Ashley may not be very helpful to a
firm, but adding up the quantity demanded of all your customers can create
a_____________ _____________ schedule.
21. A market demand schedule shows the quantities demanded at
each___________ by all___________ in the marketplace
22. Look at figure 4.3 on page 81 on the right-hand side
demand schedule taking into account all the customers of
restaurant at $.50 what will be the quantity demanded by
customers____________ at three dollars a slice what will
demanded?___________
there is a market
the pizza
the
be the quantity
The Demand Graph:
23. Now if we take Ashley's quantity demand schedule from figure 4.3 and
plotted them on a graph would have a___________- curve.
24. A demand curve is nothing but a graphic representation of a
demand______________
25. How many axes does a demand curve have___________
26. The vertical axis of the demand curve will have prices beginning with the
lowest price at the bottom. T
F
27. Quantities demanded will be on the______________ axis with the lowest
possible quantities on the left increasing as you move to the ______________
28. Demand curves assume that Ashley's demand for pizza will be true if the price
of other goods, her income and the__________of the pizza are held constant.
29. The vertical axis of the demand curve will have the same prices for the
individual demand and for the market demand. T
F
30. However the market demand curve will have larger quantities on the
horizontal___________.
31. Look at the fast fact page 80. The Federal Trade Commission requires that
your online order be shipped in how many days?
32. If the company cannot ship within 30 days what must they do if you do not
accept the delay?__________
33. The online company is not required to notify you if they cannot ship within
30 days. T
F
34. Look at figure 4.2 on page 80. If the price of pizza increases and you buy
Subway instead what is this effect called?______________
35. If the price of pizza increases and you decrease the consumption of salads so
that you could afford the higher price pizza this is called_____________ effect.
36. So the income effect makes the consumption of other goods go down, as the
price of pizza and increases but the substitution effect makes the consumption of
lesser expensive foods go____________.
37. However, if the price of pizza increases the income effect will do what to
the consumption of pizza, and if the price of pizza increases, the substitution
effect will do what to the consumption of pizza?____________
38. Now let's look at price decreases. If the price of pizza decreases what will
happen to the consumption of other goods, as you feel richer,___________ when you
buy more of other foods because the price of pizza has come down this is an
example of_________________ effect.
39. When the price of pizza goes down, you are no longer interested in Subway so
the consumption of other foods will?_____________
40. When the price of pizza decreases the income effect will cause the
consumption of pizza to do what___________. When the price of pizza decreases
the substitution effect will drive the consumption of pizza up or
down?__________