Chapter 4- Section 2 Flashcards
What happens when prices drop?
Consumers pay less therefore they have more money; they feel wealthier and buy more
A movement along the demand curve that shows a change in the quantity of the product purchased in response to a change in price
Change in quantity demanded
The change in quantity demanded because of the change in price that alters consumers real income
Income effect
How can an increase in price affect quantity demanded?
Less quantity demanded
What do consumers tend to do when similar products are available and one is more costly than other?
Purchase the cheaper product
The change in quantity demanded because of the change in the relative price of the product
Substitution effect
Something that causes the demand curve to shift
Change in demand
What happens if the consumer income rises?
Demand curve goes to the right more money is spent
What factors can affect consumer tastes?
Ads, news reports, fashion trends, intro to new products, and seasons
What happens to the demand for a product if the price of a substitute goes up?
Higher demand for the cheaper product
How does an increase in a product price affect demand for the product’s complement?
It goes down because there’s no money left over
What happens to the demand for product if consumers think that a future product will be better?
Down, people want to save for the better product
Can be used in place of other products
Substitutes
The use of one increases the use of another
Complements
What happens to the demand for product if consumers think there’ll be a shortage in the future?
Goes up
