Ch. 5-Demand & Elasticity Flashcards
Individual Demand Schedule
The quantity of a good that an individual is willing and able to buy at each price, other things equal
Demand
The amount of a product that individuals are willing and able to buy over a certain period of time
Individual Demand Curve
A graphical equation of the individual demand schedule, showing the quantity of a good that an individual is willing and able to buy at each price, all other things equal
Law of Demand
Other things equal, the lower the price of a product, the larger the quantity demanded; the higher the price of a product, the smaller the quantity demanded
Substitution Effect (of a Price Change)
The tendency to purchase more of those products that have become relatively cheap and fewer of those products that have become relatively more expensive when relative prices change
Purchasing Power
The amount of goods and services that consumers are able to buy with their limited incomes, given prices, also called real income
Income Effect (of a Price Change)
The change in the quantity demanded of a good due to the effect that the change in its price has on an individual’s purchasing power or real income
Market Demand Schedule
The total amount demanded of a good by all the consumers at each price, other things equal; the summation of the individual demand schedules
Market Demand Curve
A graphical representation of the market demand schedule, showing the total quantity demanded of a good by all consumers at each price, other things equal; the horizontal summation of the individual demand curves
Change in Quantity Demanded
A movement along the demand curve as price changes, other things equal
Change in Demand
A shift in the entire demand curve
Normal Good
A good whose consumption rises as income rises, other things equal
Substitutes
Products that provide the same general kind of services; specifically, two goods whose relationship is such that a decrease in the price of one good decreases the demand for the other good
Complements
Products that are used together to provide a service; specifically, two goods whose relationship is such that a decrease in the price of one good increases the demand for the other good
Engel Curve
A graphical representation of the relationship between income and quantity demanded, other things equal
