Chapter 3 -Demand, Supply, and Market Equilibrium Flashcards
Demand
A schedule that or curve that shows the various amounts of a product that consumers are willing and able to purchase at each of a series of possible prices during a specified period of time
Law of demand
Other things equal, as price falls the quantity demanded rises, and vice versa
Diminishing marginal utility
As a consumer increases the consumption of a good or service, the marginal utility obtained from each additional un it of the good or service decreases
Substitution effect
A change in the price of a product changes the expensiveness of that good and hence changes the willingness of consumers to buy it rather than other goods
Income effect
A change in the price of a product changes a consumer’a real income (purchasing power) and thus the quantity of the products purchased
Demand curve
A curve illustrating the inverse (negative relationship) between the quantity demanded of a good or service and it’s price, other things equal
Determinants of Demand
Factors other than price that determine the quantities demanded of a good or service
Normal goods
Good or services whose consumption rises when income increases and falls when income decreases, price remaining constant
Inferior goods
Goods or services whose consumption falls when income increases and rises when income decreases, price remaining constant
Substitute goods
Products or services that can be used in place of each other
Complementary goods
Products and services that are used together
Change in demand
A change in the quantity demanded of a good or service at every price; a shift of the entire demand curve to the right(an increase in demand) or to the left (a decrease in demand)
Supply
A schedule or curve that shows the amounts of products that producers are willing and able to make available for sale at each of a series of possible prices during a specific period
Law of Supply
The principle that, other things equal, an increase in the price of a product will increase the quantity of it supplied, and conversely for a price decrease
Supply Curve
A curve illustrating the p positive (direct) relationship between the quantity supplied of a good our service and is price, other things equal
