Ch 4 Flashcards
What is a change in demand? List and explain the effect of factors that may cause a change in demand.
income- a consumers income affects his or her demand for most goods. most items that we purchase are normal goods.
normal good - a good that consumers demand more of when their incomes increase
inferior good - a good that consumers demand less of when their incomes increase
consumer expectations
population
demographics- the statistical characteristics of population segments, especially when used to identify consumer markets
consumer tastes and advertising
prices or relating goods
complements - two goods that are bought and used together. if demanded rises for one good, then demand for its complements will increase
substitutes - good that are used in place of one another. if the price of one good increases, then demand for its substitute will decrease.
law of demand
as the price of a good or service is lower demand goes up; as the price of a good or service is raised demand for the good or service goes down - in short, price and demand have an inverse relationship. a demand curve has a negative slope. (demand is from the perspective of the consumer.)
Does a rise in income always increase the demand for a good? Why or why not?
No, the demand for inferior goods decreases with increased income
What two qualities make up demand?
a) the desire to own something
b) the ability to pay for it
What are the limits of a demand curve?
a demand curve is only accurate for one very specific set of market conditions. it cannot predict changing market conditions.
Understanding factors that affect elasticity
availability of substances - makes more elastic
relative importance - the more important the less elastic
necessities verses luxuries - need something so will pay whatever for it
change over time - more time, more elastic
if there is an increase in demand the curve shifts _______.
right
decrease in demand curve shifts ______.
left
Does a demand curve have the same elasticity throughout the curve
no, it can vary within the curve.
the desire to own something and the ability to pay for it
demand
when consumers react to an increase in a good’s price by consuming less of that good and more of a substitute good
substitution effect
the change in consumption that results when a price increase causes real income to decline
income effect
a table that lists the quantity of a good a person will buy at various prices in a market
demand schedule
a table that lists the quantity of a good all consumers in a market will buy at various prices
market demand schedule
a graphic representation of a demand schedule
demand curve
