Chapter+4

4.1 Questions 1-6
 * 1) Income effect is the change in consumption resulting from a change in real income. It explains why an increase in price decreases the quanity purchased.
 * 2) Three characteristics of a demand curve are numbers on a graph, a relationship between price and goods, and the quantity for demand increase.
 * 3) The law of demand can only apply in a free market economy because thats the only way the prices can move up and down.
 * 4) graph
 * 5) If a very expensive car was cheap then its overall demand would drop because thats not what its buyers want to tell their rich friends.
 * 6) graph

4.3 Notes Questions
 * elasticity of demand- a measure of how consumers react to a change in price.
 * inelastic- describes demand that is not very sensitive to a change in price.
 * elastic- describes demand that is very sesitive to change in price.
 * unitary elastic- describes demand whose elasticity is equal to 1
 * total revenue- the total amount of money a firm receives by selling goods or services.
 * 1) Elasticity of demand could be if gas prices go up then what is the reaction of the people buying it.
 * 2) A good with elastic demand at its current price would be the price of gas around the world.
 * 3) Heating fuel is inelastic in cold weather becauses it is something everyone needs to be able to live in comfort.
 * 4) To calculate total revenue you have to have the quantity of what is demanded per day divided by the price of it.

Chapter 4 assessment
 * 1) income effect
 * 2) normal good
 * 3) elasticity of demand
 * 4) law of demand
 * 5) unitary elastic
 * 6) demand curve
 * 7) complements

9. Substitution effect is when someone has to spend more for the same product so they move onto something different. For example if the price of skis goes up then someone might switch to snowboarding. 10. Three causes for shifts in the demand curve are population, tastes, and the price of other goods. 11. Economists use percentage change to measure elasticity of demand because everything is dealt with money and you cant use math to calculate it without percentages. 12. Four factors that effect elasticity are availability of substitutes, how much you can spend on it, what people want and don't want and change over time. 13. I think there will always be a demand for inferior goods unless people are paid a lot more money. 14. An increase in income will shift the demand curve to the right for a normal good.