Chapter 4 Flashcards
A normal good
If the demand for a good falls when income falls, the good is called a normal good.
Law of demand
Other things equal, when the price of a good rises, the quantity demanded of the good falls.
Quantity demanded
The amount of a good that buyers are willing and able to purchase.
An inferior good
If the demand for a good rises when income falls, the good is called an inferior good.
Exp: Bus rides. As your income falls, you are less likely to buy a car or take a cab, and more likely to ride the bus.
Substitutes
Two goods for which an increase in the price of one leads to an increase in the demand for the other.
[When a fall in the price of one good reduces the demand for another good, the two goods are called substitutes]
Because ice cream and frozen yogurt are both
cold, sweet, creamy desserts, they satisfy similar desires.
Complements
Two goods for which an increase in the price of one leads to a decrease in the demand for the other.
Complements are often pairs of goods that are used together, such as gasoline and automobiles, computers and software, and skis and ski lift tickets.
Demand schedule
A table that shows the relationship between the price of a good and the quantity demanded.
Demand curve
A graph of the relationship between the price of a good and the quantity demanded.
Market demand
Market demand is is the sum of all the individual demands for a particular good or service.
SHIFTS IN THE DEMAND CURVE
Because price is on the vertical axis when we graph a
demand curve, a change in price does not shift the curve but represents a movement along it. By contrast, when there is a change in income, the prices of related goods, tastes, expectations, or the number of buyers, the quantity demanded at each price changes; this is represented by a shift in the demand curve.
THE DETERMINANTS OF
QUANTITY DEMANDED.
This table lists the variables that can influence the quantity demanded in a market. Notice the special role that price plays: A change in the price represents a movement along the demand curve, whereas a change in one of the other
variables shifts the demand curve.
SHIFTS IN THE DEMAND CURVE
VERSUS MOVEMENTS ALONG THE
DEMAND CURVE. (P.72,73)
SHIFTS IN THE DEMAND CURVE
VERSUS MOVEMENTS ALONG THE
DEMAND CURVE.(P.72,73)
Ceteris paribus
“other things being equal”
Competitive Market
The market in which there are many buyers and sellers so that each has a negligible impact on the market price.
