Chapter 2- Demand and Supply Flashcards
Demand
the relationship between the various possible prices and quantities of that product consumers are willing to purchase
Quantity Demanded
the amount of product comsumers are willing to purchase @ each price
- demand will be the dependant variable
Law of Demand
states there is an inverse relationship between a product’s quantity demanded and its price
Demand Schedule
a table that shows possible combinations of prices and quantities demanded of a product
Demand Curve
a graph that expresses combination of prices and quantities demanded of a product
- independent variable goes (Price) goes on the vertical axis
- dependant variable (quantity demanded) goes on the horizontal axis
Change in Quantity Demanded
the effect of a price change on quantity demanded
- movement shows along the demand curve
Market Demand
the sum of all consumers quantity demanded for a product @ each price
Demand Factors
factors that can cause an increase or decrease in a product’s demand
- can cause the entire market to shift
5 Demand Factors
- # of buyers in a market
- Average income
- Prices of other products
- Consumer preferences
- Consumer expectations about future incomes and prices
Note: with each factor, it must be assumed that all other factors remain constant
Increase in Demand
an increase in the quantity demanded of a product at all price points
Decrease in Demand
A decrease in the quantity demanded of a product at all price points
Normal Products
products whose demand changes directly with income
- demand curve shifts to the right
Inferior Products
Products whose demand changes inversely (decreases) with income
- ex. Turnips and second hand suits
- Demand curves shifts to the left
Substitute Products
Products that can be consumed in place of one another
ex. butter and margarine
Complementary Products
Products that are consumed together
ex. cars and gasoline
- Increase in price of one causes a decrease in another
