A. Consider the demand for a product defined to be “cereal.” 1. What would be included in the definition of this product? 2. When considering the demand for this product, the market area typically would consist of what geographic area? 3. How would the quantity demanded of this product be measured? 4. If one were considering the demand curve for this product, how is the price on the vertical axis be measured? 5. How is the demand curve for this specific product defined? 6. What theory or hypothesis suggests that the demand curve for this product is downward sloping? 7. Explain the effects on the quantity demanded of this product as a result of the substitution effect if the price were to increase. 8. Explain the effects on the quantity demanded of this product as a result of the change in the number of buyers if the price were to increase. 9. Explain the relationship between the individual consumers’ demand and the market demand for this product. a. Market demand is the sum of the individual demand for a product from buyers in the market. If more buyers enter the market and they have the ability to pay for items on sale, then market demand at each price level will rise. 10. Define a change in demand for this product. 11. Assume there is an increase in the demand for the product. What is meant by an increase in demand? 12. What effect would an increase in demand have on the location of the demand curve? 13. Assume there is a decrease in the demand for the product. What is meant by a decrease in demand? 14. What effect would a decrease in demand have on the location of the demand curve? 15. Is cereal a normal or inferior good? 16. Define a normal good. 17. Define an inferior good. 18. Given your answer to #15 above, if there were an increase in average household income, what would be the direction of the effect (increase or decrease) on the demand for this product? 19. If there were an increase in the prices of eggs and bacon, what cereal demand determinant would be affected, and what would be the direction of the effect (increase or decrease) on the demand for cereal? 20. If the population of the market area were to decrease, what cereal demand determinant would be affected, and what would be the direction of the effect (increase or decrease) on the demand for cereal? 21. If there were a decrease in the price of milk, what cereal demand determinant would be affected, and what would be the direction of the effect (increase or decrease) on the demand for cereal? 22. If grabbing breakfast at a fast food store were to become more popular, what cereal demand determinant would be affected, and what would be the direction of the effect (increase or decrease) on the demand for cereal? 23. If the price of cereal were to increase, what cereal demand determinant, if any, would be affected, and what would be the direction of the effect (increase, no change, or decrease) on the demand for cereal? 24. Consider the following statement: The quantity demandedof this product at some price may not exceed the amount that sellers are willing to produce and sell at that price. [Hint: review the last paragraph on p. 5 of the Theory of Demand – Introduction Lecture Notes] 25. Consider the following statement: A decrease in the price of this product decreases the demand for the product. Is the term demand used correctly in this statement? Explain your answer. [Hint: review the section entitled “Distinction between a change in demand and a change in quantity demanded on pp. 21-23 of the Demand Determinants and the Effect of Changes in Demand Lecture Notes]