chapter 4, laws of supply and demand Flashcards
he relationship between a good’s price and the amount that people are willing to buy
demand
the relationship between a good’s price and the amount that producers are willing to provide for consumers
supply
value that is directly related to the benefits their owners receive through their use
value in use
what a particular good is worth in exchange for some other good
value in exchange
the amount of money that a buyer pays the seller for a particular item
price
prices at which a goods can be sold in an open market with many potential sellers and buyers
market price
one’s supply of a specific good or service increases, the satisfaction derived from each additional unit tends to decrease
diminishing marginal utility
the amount of satisfaction that results form a one-unit increase of a product
marginal utility
the total amount of satisfaction received from possessing a particular amount of a good
total utility
explains the inverse relationship between the price of a good and the amount that people choose to buy
law of demand
in order to know if demand for an item is high or law, we must:
be able to show the amount bought over al length of time
says that when the price of a good falls, consumers tend to buy more of that good or of other items because they can do so without giving up anything
income effect
indicates that people tend to substitute less expensive goods for ones whose prices have risen
substitution effect
a list of numbers that compares price with quantity demanded
demand schedule
representation of the quantity of goods purchased at different prices
demand curve
“other things being equal”
ceteris paribus
five factor that can increase or decrease the demand for a good:
- tastes and preferences
- income
- population
- prices of related goods
- consumer expectations
a good whose demand is directly related to consumers’ incomes is called a:
normal good
demand for these items decreases as consumers’ incomes increase, and vice versa
inferior good
a good capable of being used in place of another
substitutes
a good often used in conjunction with another
complements
states the direct relationship between the price of a good and the amount that suppliers will make available
law of supply
a list of numbers that compares price with quantity supplied
supply schedule
a representation of the quantity of goods supplied at different prices
supply curve
