Chapter 4- Demand Flashcards
Law of demand
Economic law that states that consumers buy more of a good when it’s prices decrease and less when its prices increase
Demand
The desire to own something and the ability to pay for it
Substitution effect
When consumers react to an increase in the goods price by consuming less of that good and more of another
Income effect
Change in consumption resulting from a change in real income
Demand schedule
A table that lists the quantity of a good a person will buy at each different price
Market demand schedule
A table that lists the quantity of a good consumers will buy at each different price
Demand curve
Graphic representation of a demand schedule
Ceteris Paribus
Latin for “all other things held constant”
Normal good
A good that consumers demand more of when their income increases
Inferior good
A good consumers demand less of when the incomes increase
Substitutes
Good used in place of each other
Elasticity of demand
Measure of how consumers react to change in price
Inelastic
Demand that is not sensitive to price change
Elastic
Demand that is very sensitive to price change
Unitary elastic
describes demand elasticity is exactly equal to one
Total revenue
Total amount of money a firm receives by selling goods or services
