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REVENUE EFFECT: The goal of imposing taxes to generate revenue used to finance the operation of government, most notably to finance the provision of public goods. This is one of two reasons, and the primary reason, that governments impose taxes. The other reason is the allocation effect. Governments work the revenue effect because they need access to income and resources to build highways, defend the nation, educate the population, and maintain the legal system. They purchase these resources with tax revenue generated through the revenue effect.
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                           QUANTITY DEMANDED: The specific quantity of a good that buyers are willing and able to buy at a specific demand price. The key word is "specific." Quantity demanded and demand price form matched pairs--one quantity, one price. The combination of all price-quantity pairs is then what constitutes demand. The demand curve is a plot of the quantity demanded at each demand price. Quantity demanded is the maximum quantity that buyers are willing and able to buy at a given price. The primary influence on quantity demanded is the demand price. The quantity demanded is generally less if the demand price is higher and more if the demand price is lower.Constrained by SatisfactionBuyers bump into a maximum quantity demanded for a given demand price due to the satisfaction received from consumption. Because the satisfaction generally falls with the quantity consumed, buyers are willing to pay a lower price as the quantity demanded increases. Buyers are willing to buy a larger quantity if the price received declines to match the falling satisfaction. Should they try to consume too much, beyond the maximum quantity demanded, satisfaction falls short of the price paid.Consider the hot fudge sundae buying activities of Duncan Thurly. Duncan is willing and able to buy one Hot Momma Fudge Bananarama Ice Cream Sundae a week at a $3 demand price. This price matches the satisfaction Duncan receives from this Hot Momma Fudge Bananarama Ice Cream Sundae. However, should Duncan try to consume a second sundae, the satisfaction falls short of this $3 price. On the Demand CurveAs the maximum quantity that buyers are willing and able to buy, the quantity demanded lies ON the demand curve. In essence, the demand curve plots the range of quantities demanded for a range of demand prices.Consider the demand curve for electronic calculators displayed in the exhibit to the right. For a demand price of $45, the quantity demanded is 10 calculators. Would calculator buyers be willing to buy fewer than 10 calculators at this price? Certainly. In so doing, they receive more satisfaction than the price paid. Would calculator buyers be willing to buy more than 10 calculators at this price? Certainly not. The story is the same for any quantity. Only the numbers differ. For a demand price of $15, the quantity demanded is 70 calculators. Buyers are willing to buy fewer than 70 calculators at this price, but not more. Quantity Demanded, Not DemandWhile the two terms are occasionally confused, quantity demanded is not the same as demand. - Quantity demanded is the specific quantity that buyers demand at a specific demand price. Quantity demanded is matched up with a specific price. Should the price change, then so too does the quantity demanded. Quantity demanded is a single number.
- Demand, however, is the range of prices and quantities. It is all price-quantity pairs that make up the demand curve. Demand is a whole range of numbers.
Recommended Citation:QUANTITY DEMANDED, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2019. [Accessed: December 9, 2019].
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Today, you are likely to spend a great deal of time lost in your local discount super center wanting to buy either hand lotion, a big bottle of hand lotion or a lighted magnifying glass. Be on the lookout for cardboard boxes.
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