TEST BANK For Microeconomics, 9th Edition by Jeffrey
M. Perloff
what is demand - ANSWER:quantity purchasers are willing and able to buy at any
given price and time
why does the demand curve point downwards - ANSWER:1) income - price increase
= real income decrease
2)substitution effect
3)diminshing returns , marginal utility of extra , declines as more is consumed
what causes shifts in demand - ANSWER:Population
Interest rates
Real income
Advertising
Trends
Emotional and Social
Substitutes
does price change shift demand - ANSWER:no
What is derived demand - ANSWER:where the demand for one thing depends on the
demand for another (FOPS)
what is composite demand - ANSWER:a good is demanded for more than 1 use
what is elasticity - ANSWER:responsiveness of demand/supply to a change in
demand/supply
what is PED - ANSWER:responsiveness of demand to a change in price
ped equation - ANSWER:%changeQD/ %changePrice
how do u calculate %change - ANSWER:change/original *100
when is PED elastic (ignore sign) - ANSWER:PED >1
change in price = more than proportional change in QD
subs or luxury
when is PED inelastic (ignore sign) - ANSWER:PED <1
, change in price = less than proportional to change in QD
no subs or necessity
if PED is 1 - ANSWER:unit elastic = proportionate
when price increases and a good is inelastic what happens - ANSWER:revenue will
increase .. less than proportionate decrease in QD
when price increases and a good is elastic what happens - ANSWER:revenue will
decrease .. more than proportionate decrease in qd
what determines PED - ANSWER:-Branding = better = inc D
- no/closeness of subs- greater for close subs
- proportion of income spent on a good e.g. car vs salt
- time period - longer =elastic
- luxury or necessity
- habit forming = inelastic
lable the parts of a demand curve with PED - ANSWER:top = elastic
middle = unit
bottom = inelastic
max revenue at .... elastic - ANSWER:unit (top)
totally inelastic = - ANSWER:0
infinitely elastic - ANSWER:infinity
unit elastic graph - ANSWER:
what is income elasticity of demand - ANSWER:measures responsiveness of demand
to a change in price
income elasticity of demand - ANSWER:%change QD / %change y
what is an inferior good and what yed will it have+ example - ANSWER:income
increase means qd
-ve yed
own brands
what is a normal good and what yed will it have + example - ANSWER:income
increase = qd increase
+ve yed
holidays
what yed will a normal luxury good have - ANSWER:greater than 1 - elastic
M. Perloff
what is demand - ANSWER:quantity purchasers are willing and able to buy at any
given price and time
why does the demand curve point downwards - ANSWER:1) income - price increase
= real income decrease
2)substitution effect
3)diminshing returns , marginal utility of extra , declines as more is consumed
what causes shifts in demand - ANSWER:Population
Interest rates
Real income
Advertising
Trends
Emotional and Social
Substitutes
does price change shift demand - ANSWER:no
What is derived demand - ANSWER:where the demand for one thing depends on the
demand for another (FOPS)
what is composite demand - ANSWER:a good is demanded for more than 1 use
what is elasticity - ANSWER:responsiveness of demand/supply to a change in
demand/supply
what is PED - ANSWER:responsiveness of demand to a change in price
ped equation - ANSWER:%changeQD/ %changePrice
how do u calculate %change - ANSWER:change/original *100
when is PED elastic (ignore sign) - ANSWER:PED >1
change in price = more than proportional change in QD
subs or luxury
when is PED inelastic (ignore sign) - ANSWER:PED <1
, change in price = less than proportional to change in QD
no subs or necessity
if PED is 1 - ANSWER:unit elastic = proportionate
when price increases and a good is inelastic what happens - ANSWER:revenue will
increase .. less than proportionate decrease in QD
when price increases and a good is elastic what happens - ANSWER:revenue will
decrease .. more than proportionate decrease in qd
what determines PED - ANSWER:-Branding = better = inc D
- no/closeness of subs- greater for close subs
- proportion of income spent on a good e.g. car vs salt
- time period - longer =elastic
- luxury or necessity
- habit forming = inelastic
lable the parts of a demand curve with PED - ANSWER:top = elastic
middle = unit
bottom = inelastic
max revenue at .... elastic - ANSWER:unit (top)
totally inelastic = - ANSWER:0
infinitely elastic - ANSWER:infinity
unit elastic graph - ANSWER:
what is income elasticity of demand - ANSWER:measures responsiveness of demand
to a change in price
income elasticity of demand - ANSWER:%change QD / %change y
what is an inferior good and what yed will it have+ example - ANSWER:income
increase means qd
-ve yed
own brands
what is a normal good and what yed will it have + example - ANSWER:income
increase = qd increase
+ve yed
holidays
what yed will a normal luxury good have - ANSWER:greater than 1 - elastic
