Economics GRQs Chapter 4 - Demand (due Tuesday)

Chapter 4

Section 1 Understanding Demand

Choose a single product or service to apply to all of the following questions, it may not be one used in the text.  Examples:  cars, jeans, housecleaning.

1. What is the relationship between price and demand for your product?
2. Define the substitution effect and give an example of an available substitute for your product.
3. How would rising income effect demand for your product?
4. What does a demand curve indicate?  Draw a demand curve for your product.

Section 2 Shifts of the Demand Curve

1.       What are the most common causes for shifts in demand?  For each cause draw a demand curve for your product and indicate in what direction the curve shifted.

2.       Explain how the demand for compliments and substitutes are related to the demand for your good or service.

Section 3 Elasticity of Demand

1.       Is the demand for your product elastic, inelastic, unitary elastic?  Explain your answer by referencing product’s available substitutes, relative importance, and if it is a luxury or a necessity.

2.       Explain in your own words how the demand for gasoline has changed over time.

3.       Explain the relationship between total revenue and elasticity.