Ch 15 Market Demand

Question 1

Market (aggregate) demand

Answer 1

Sum of the demands of all individual consumers

Question 2

Inverse demand function

Answer 2

Measures what the market price of a good would have to be in order to have a certain number of units be demanded

Question 3

Intensive margin

Answer 3

Results from price change leading consumers to consume more or less of one good or the other, while still consuming some of both goods

Question 4

Extensive margin

Answer 4

Changes in consumers deciding to enter the market for one of the goods based on a revision in prices

Question 5

Elasticity

Answer 5

Measure of responsiveness to price changes

Question 6

Price elasticity of demand

Answer 6

The percent change in quantity divided by the percent change in price

Question 7

Elastic demand

Answer 7

Quantity demanded very responsive to price (ratio >1)

Question 8

Inelastic demand

Answer 8

Quantity demanded insensitive to price (ratio <1)

Question 9

Unit elastic demand

Answer 9

Elasticity of exactly 1

Question 10

Revenue

Answer 10

Price of a good time the quantity sold of that good

Question 11

Marginal revenue

Answer 11

Additional revenue derived from selling one more unit of a good

Question 12

Income elasticity of demand (and related goods terms)

Answer 12

How the quantity demanded changes in response to a change in income
Normal good - income elasticity positive
Inferior good - income elasticity negative
Luxury good - income elasticity >1
Average of all goods - income elasticity = 1 (necessity of ratio)