a. a concept specifyingthe different quantities of an item that will bebought at different prices.
2. Market demand curve
b. shows the various quantities demanded ofa particular product at all prices that mightprevail in the market at a given time.
3. Demand curve
c. a graph showingthe quantity demanded at each and everyprice that might prevail in the market.
4. Demand
d. states that thequantity demanded varies inversely withits price.
5. Demand schedule
e. shows the quantitiesdemanded by everyone who is interestedin purchasing the product.
Discussion
1.Do you buy more of an itemwhen the price goes down, or less of it when theprice goes up? How does thisillustrate the concept of demand?
2.How do you reactto a change in the price of an item? How is this behavior shown on the demand curve?
3.If the pricesof some commodities or services drop,consumers willbe better able andmore willing to buythem. How doesthis situationreflect the Law ofDemand?
4. How does the marketdemand curve reflect the Law of Demand?
6. Complements
f. the extra usefulness oradditional satisfaction a person gets fromacquiring or using one more unit of aproduct.
7. Inelastic
g. the principle which states that the extra satisfactionwe get from using additional quantitiesof the product begins to decline.
8. Elasticity
h. products that can be used in place of other products.
9. Elastic
i. related products that increase the use of the other.
10. Substitutes
a. a measure ofresponsiveness thatshows how onevariable responds to achange in anothervariable.
11. Marginal utility
b. type ofelasticity where achange in price causesa relatively largerchange in quantitydemanded
12. Diminishing marginal utility
c. type ofelasticity where achange in price causesa relatively smallerchange in quantitydemanded.
Discussion
1.How does theprinciple of diminishing marginal utility explain theprice we pay for another unit of a good or service?
2.What are the examples of substitutes? What happens with the demand for a product if the price of its substitute goes up? What happens with the demand for a product if the price of its substitute goes down?
3.What are the examples of complements? What does an increase in the price of onegood usually lead toin thedemand for its complement?
While reading the text match the questions to the answers.
· What is the relationship between elasticity and revenues?
· What are the determinants of demand elasticity?
· What is demand elasticity?
· How can we determineelasticity?
· How do we determine total expenditures? Why is it very important?
Text A
Why is Demand Important?
Fortunately, the concept of demand iseasy to understand because it involves onlytwo variables - the price and quantity of aspecific product at a given point in time.
So, when it comes to demand, there are twotypes of changes that can occur. When the price of a productchanges while all other factors remainthe same, we have a change in the quantitydemanded. Sometimes other factors changewhile the price remains the same -when this happens, we see a changein demand.
Only a change in price can cause achange in quantity demanded.When the price goes down, the quantity demanded increases. Whenthe price goes up, the quantity demanded decreases. Both changesappear as a movement along the demand curve.
