Chapter 7 - Demand Flashcards
Define - “Consumer Surplus”
The difference between how much buyers are prepared to pay for a good and what they actually pay.
Define - “Demand Curve”
The line on a price/quantity diagram that shows the level of effective demand at any given price.
Define - “Extension of Demand”
When quantity demanded for a good increases because its price falls; it is shown by a movement down the demand curve.
Define - “Law of Diminishing Marginal Utility”
The value or utility that individual consumers gain from the last product consumed falls the greater the number consumed. So the marginal utility of consuming the sixth product is lower than the second product consumed.
Define - “Underlying Growth Rate”
The long-run average growth rate for an economy over a period of time”
Define - “Shift in the Demand Curve”
A movement of the whole demand curve to the right or left of the original caused by a change in any variable affecting demand except price.
Define - “Contraction of Demand”
When quantity demanded for a good falls because its price rises; it is shown by a movement up the demand curve.
What are the Conditions of Demand?
Price, Income, etc.
Define - “Effective Demand”
The quantity of a good at any given price, given that other factors of demand remain unchanged.
