๐ Topic Summary
The demand curve is a graphical representation of the relationship between the price of a good or service and the quantity demanded for a given period. It slopes downward, illustrating the law of demand: as price increases, quantity demanded decreases, and vice versa. Elasticity of demand measures how much the quantity demanded changes in response to a change in price. If demand is elastic, a small change in price leads to a large change in quantity demanded. If demand is inelastic, changes in price have little impact on quantity demanded.
๐ Part A: Vocabulary
Match each term with its correct definition:
- Demand Curve
- Elasticity of Demand
- Law of Demand
- Inelastic Demand
- Elastic Demand
Definitions:
- A situation where changes in price have little impact on quantity demanded.
- A graphical representation of the relationship between price and quantity demanded.
- A situation where a small change in price leads to a large change in quantity demanded.
- The principle that as price increases, quantity demanded decreases.
- A measure of how much quantity demanded changes in response to a change in price.
โ๏ธ Part B: Fill in the Blanks
Complete the following paragraph with the correct terms:
According to the ____________, as the price of a good increases, the quantity demanded __________. The __________ illustrates this relationship graphically. If a product has __________ demand, a change in price will significantly affect the quantity demanded.
๐ง Part C: Critical Thinking
Explain a real-world scenario where a business might intentionally increase the price of a product even if it leads to a decrease in quantity demanded. What factors would they need to consider before making this decision?