Chapter 3 Flashcards
Define Market
Where buyers and sellers interact to trade goods, services, or resources.
Define Quantity Demanded
amount of an item that buyers are willing and able to purchase
Define Demand
Full description of how the quantity demanded changes as the price of an item changes.
What are the factors affecting market demand? (PINTE)
P - Price / I - Income / N - Number of Buyers / T -tastes or preferences / E - expectations about future prices/market conditions
What does the Law of Demand state?
quantity demanded of a good falls when price of good rises (vice versa) if other factors that affect buyers’ decisions are
unchanged
Simply Law of Demand means…
Price goes up, Demand go down & vice versa
What’s a Demand Curve?
A graph that shows change in demand w/ a change in price
What do the vert and hort axis show?
V - various prices / H - quantity
If the item/comomodity price falls, what will happen?
Quantity demanded will increase cuz it’s cheaper now. Peeps want more cuz its cheap.
What are 3 reasons why demand slopes go down?
Income Effect / Diminishing Marginal Utility / Substitution Effect
Define Income Effect
Price of a good goes down - it allows you to buy more of that item w/ the same amt of money you usually have for it
Define Dimishing Marginal Utility
The more a person consumes good during a fix time.. it starts to lose its value.
Define Substitution Effect
Increase in the price of a good will increase the demand for its substitutes, (vice versa)
Define Market Demand
Overall or total demand for a good, service, or resource.
How to find Market Demand?
By adding up all the individual demand
Chang in Quantity Demand? (Examples)
Price drops and quantity increases (vice versa /
Which way does the curve shift when it increase and decrease.
Increase in demand - shift right / Decrease - shift left
What are determinants of Demand and Shift in Demand Curve?
Income / Price / Tastes & preferences / Expected change in future / # of buyers
Difference between quantity demand and demand?
If price is fixed but all other factors remain same - quantity demand / Demand - factors are varied
What does normal goods mean w/ examples?
A good where demand increases as income rises and decreases as income falls. / Steak, Cars, very valuable items you can afford.
What does inferior goods mean?
A good where the demand increases as income falls and decreases as income rises. / Mac & cheese, ramen noodles, stuff you can only afford cuz of income
Define Substitutes
Goods & services that can be used for
the same purpose (EXs: Big Mac & Whopper / Coke & Pepsi)
Define Complements
Goods and services that are used together (EXs: Cars and Petrol / Toothpaste and toothbrush)
What’s action of Demand Curve? (Tastes & Preferences)
Taste & Pref increase so does quantity, vice versa / Increase shift to right
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