Chapter 4 Flashcards
Demand
Desire to own something and the ability to pay for it
Law of demand
Consumers buy more of a good when it’s price decreases and less when it’s price increases
Substation effect
Consumers react to an increase in a good’s price by consuming less of that good and more of other goods
Income effect
The change in consumption resulting from a change in real income
Demand schedule
Table that lists the quantity of a good a person will buy at each different price
Market demand schedule
Table that lists the quantity of a good all consumers in a market will buy at each different price
Demand curve
A graphic representation of a demand schedule
Ceteris paribus
A Latin phrase that means “all other things held constant”
Normal good
A good that consumers demand more of when their incomes increase
Inferior good
A good that consumers demand less of when their incomes increase
Complements
Two goods that are brought and used together
Substitutes
Goods used in place of one another
Elasticity of demand
A measure of how consumers react to a change in price
Inelastic
Describes demand that is not very sensitive to a change in price
Elastic
Describes demand that is very sensitive to a change in price
