Elasticity of Demand | Perfect Inelastic Demand

Why is there no such thing as a perfectly inelastic demand?

Your Answer:

Perfectly inelastic demand suggests that any price can be charged for a good and consumers will still buy it. However, no matter how much a good is desired and/or needed, the price charged for that good cannot be changed without affecting the purchasing pattern of the consumers who desire it. Even a good necessary to maintain life cannot be priced beyond a certain level or consumers will simply seek a substitute good or other options.

Source: Heyne, Boettke, and Prychitko, The Economic Way of Thinking, 11/e, Pearson

http://wps.prenhall.com/bp_heyne_econway_11/33/8535/2184986.cw/-/2184999/index.html

Elasticity of Demand | Substitue Good

What impact does time have on demand elasticity and the use of substitute goods?

Your Answer:

Although many things happen faster and faster these days, it still requires an investment of time to discover and obtain substitute goods. Therefore, if the price of a good rises, consumers will seek out cheaper substitute goods, and the more time they have to conduct there search, the more likely it is that they will be able to obtain a cheaper substitute. With greater time available to search for substitute goods, the more elastic a demand for any good will be.

Source: Heyne, Boettke, and Prychitko, The Economic Way of Thinking, 11/e, Pearson

http://wps.prenhall.com/bp_heyne_econway_11/33/8535/2184986.cw/-/2184999/index.html

Demand | Price of Good Fall - Complementary Good

If the price of a good falls, what impact will this have on a complementary good?

Your Answer:

Complementary goods are those goods that mutually add to the enjoyment of each other, like hamburgers and French fries. 

If the price of a good falls, the law of demand tells us that a greater quantity of that good will be sold, and a greater quantity of a complementary good will also be sold.

Source: Heyne, Boettke, and Prychitko, The Economic Way of Thinking, 11/e, Pearson

http://wps.prenhall.com/bp_heyne_econway_11/33/8535/2184986.cw/-/2184999/index.html

Demand | Price of Good Rise - Substitute Good

If the price of a good rises, what impact will this have on a cheaper substitute good?

Your Answer:

Substitute goods are any good that can be used instead of another good to more or less take its place. Common sense and economic principles assert that if the price of any good rises, the demand for a cheaper substitute good also rises as people seek out alternatives that may be less costly.

Source: Heyne, Boettke, and Prychitko, The Economic Way of Thinking, 11/e, Pearson

http://wps.prenhall.com/bp_heyne_econway_11/33/8535/2184986.cw/-/2184999/index.html

Demand | What Else is Needed to Change the Demand?

Since a change only in the price of a good does not change the demand for that good, what else is needed to change the demand?

Your Answer:

For the demand of a good to change, consumers must be willing to pay higher prices for any quantities of a good than was previously the case, or they decide that they will only pay lower prices for any quantities of a good than was previously the case. 

Changes in attitudes toward the good or toward a compliment or substitute good must change to reflect a wholesale change in demand.

Source: Heyne, Boettke, and Prychitko, The Economic Way of Thinking, 11/e, Pearson

http://wps.prenhall.com/bp_heyne_econway_11/33/8535/2184986.cw/-/2184999/index.html

Supply & Demand | Additional Resources | Moving Along the Curve | Shifting the Curve | Government Intervention

Supply & Demand

Additional Resources

Demand Curve – Moving Along the Curve

http://www.college-cram.com/study/economics/supply-and-demand/demand-curve-moving-along-the-curve/

Demand Curve – Shifting the Curve

http://www.college-cram.com/study/economics/supply-and-demand/demand-curve-shifting-the-curve/

Supply Curve – Moving Along the Curve

http://www.college-cram.com/study/economics/supply-and-demand/supply-curve-moving-along-the-curve/

Supply Curve – Shifting the Curve

http://www.college-cram.com/study/economics/supply-and-demand/supply-curve-shifting-the-curve/

Equilibrium Curve – Shifting the Curve

http://www.college-cram.com/study/economics/supply-and-demand/equilibrium-curve-shifting-the-curve/

Government Intervention and Economics: Price Ceiling

http://www.college-cram.com/study/economics/government-intervention/price-ceiling/

Government Intervention and Economics: Price Floor

http://www.college-cram.com/study/economics/government-intervention/price-floor/

Resources provided from www.College-Cram.com

Preliminaries| Positive or Normative ?

Are the following statements positive or normative? (If a sentence has both positive and normative parts, break it into positive and normative statements.)

1. A minimum wage causes some people to lose their jobs.

2. The minimum wage is a good policy because it helps poor people.

3. The minimum wage raises costs to firms and hence is bad.

Answers:

1. Positive.

2. Normative.

3. "The minimum wage raises costs" is positive; "The minimum wage is bad" is normative.

Source: Perloff, Microeconomics, 5^th edition, Pearson

http://wps.aw.com/aw_perloff_microecon_5/85/21981/5627218.cw/index.html