Prices tend to rise
Explanation
When demand exceeds supply, there is upward pressure on prices because consumers compete to buy the limited goods, leading to a rise in market prices.
Demand is elastic
Explanation
A PED greater than 1 indicates elastic demand, meaning that the quantity demanded responds proportionally more than the price change, so consumers are highly responsive to price changes.
Demand decreases
Explanation
For inferior goods, demand decreases as consumer income increases because consumers tend to buy less of these lower-quality alternatives when they have higher income.
Demand is elastic, meaning small price changes lead to large variations in quantity demanded.
Explanation
A PED greater than 1 indicates elastic demand, where consumers are highly responsive to price changes. The other options describe inelastic, perfectly inelastic, and perfectly elastic cases, which are characterized by different PED values.
Demand for the good increases as consumer income rises.
Explanation
Normal goods have demand that increases as consumer income increases, reflecting a positive income elasticity. The other options describe inferior goods, demand invariance, and the effect of price, which are unrelated to normal goods' income response.
Demand equals supply, balancing the market.
Explanation
Market equilibrium occurs where demand equals supply, meaning the quantity consumers want to buy matches what producers are willing to sell. Excess demand or supply indicates disequilibrium.
Alfred Marshall, who contributed heavily to utility and demand theory around the 1890s.
Explanation
Alfred Marshall was instrumental in developing the concept of price elasticity of demand in the late 19th century, making the first formal analysis of how quantity demanded responds to price changes. The other economists contributed significantly to economics, but not specifically to elasticity theory.
An advertising campaign that successfully increases consumer awareness of a product.
Explanation
Advertising can increase demand by making consumers more aware and interested, shifting the demand curve outward. The other options either cause movement along the demand curve or decrease demand.
Quantity demanded remains constant regardless of price changes.
Explanation
Perfectly inelastic demand means consumers will buy the same quantity regardless of price, indicated by PED = 0. The other options describe elastic or perfectly elastic demand scenarios.
Lock in the answers with 10 flashcards on Understanding Microeconomic Market Dynamics.
Demand — definition?
Quantity consumers are willing to buy at a price.
Elasticity — role?
Measures responsiveness of Q to P or income.
Price elasticity of demand — mechanism?
Ratio of % change in QD to % change in P.
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