Chapter 4 Flashcards
A combination of quantities that someone would be willing and able to buy over a range of possible prices at a given moment
demand
branch of economic theory that deals with behavior and decision making by small units such as individuals and firm
microeconomics
listing showing the quantity demanded at all possible prices that might prevail in the market at a given time
demand schedule
something that motivates
incentive
graph showing the quantity demanded at each and every possible price that might prevail in the market at a given time
demand curve
rule stating that more will be demanded at lower prices and less at higher prices; an inverse relationship between price and quantity demanded
law of demand
demand curve that shows the quantities demanded by everyone who is willing and able to purchase a product at all possible prices at one moment in time
market demand curve
additional satisfaction or usefulness obtained from acquiring or consuming one more unit of a product
marginal utility
decrease in additional satisfaction or usefulness as additional units of a product are acquired
diminishing marginal utility
movement along the demand curve showing that a different quantity is purchased in response to a change in price
change in quantity demanded
that portion of a change in quantity demanded caused by a change in a consumers income when the price of a product changes
income effect
the portion of a change in quantity demanded that is due to a change in the relative price of the good
substitution effect
different amounts of a product are demanded at every price, causing the demanded curve to shift to the left or the right
change in demand
competing products that can be used in place of one another; products related in such a way that an increase in the price of one increase the demand for the other
substitutes
products that increase the use of other products; products related in such a way that an increase in the price of one reduces the demand for both
complements
A measure of responsiveness that tells us how it dependent variable, such as quantity demanded a quantity supply, responds to a change in independent variable, such as pride
elasticity
The extent to which a change in price causes a change in quantity demand; demand elasticity has three cases: elastic, inelastic, unit elastic
demand elasticity
type of elasticity in which a change in the independent variable (usually price) results in a larger change in the dependent variable (usually quantity demanded or supply)
elastic
The case of demand elasticity where the percentage change in the dependent variable (usually price) causes a less than proportionate change in the dependent variable (usually quantity demanded or supplied)
inelastic
elasticity were a change in the independent variable (usually price) generates a proportional change of the dependent variable (quantity demanded or supplied)
unit elastic
