Economics: Chapter 4: Demand
Define the following terms and provide examples for each.
Normal good
Compliments
Income effect
Demand curve
Inelastic
Inferior good
Law of demand
elastic
elasticity of demand
demand schedule
income effect
Organize information on the shifts in the demand curve on the multi-flow map with possible
causes and effects for shifts in the demand curve.
An increase in car
prices
Causes this
type of shift in
the demand
curve
Shifts to the right
No Change in
demand
1. Describe the substitution effect in your own words and give an example.
2. List and describe three causes for shifts in the demand curve
3. Why do economists use percentage change to calculate elasticity of demand?
4. What are the four factors of elasticity?
5. Will there always be a demand for inferior goods?
6. How could the demand for an inferior good decrease?
7. If a change in price of a good is the only variable (ceteris paribus), how would that
change be illustrated by the demand curve?
8. Do you agree or disagree with the following statement “An increase in income will shift
the demand curve for a normal good to the left”. Explain your response.
Service
Demand Schedule for Selected Services
Urban
Suburban and Rural
$20
$30
$10
$20
$30
8
2
82
71
42
Lawn mowing
$10
15
Taxi ride
84
78
37
10
8
1
Haircut
92
61
18
88
57
19
9. How many urban residents would take a taxi ride that costs $20?
10. Which service has an equally low demand in both regions at $30?
11. Compare lawn mowing and taxi rides. What reason could there be for such different
demands in different areas?