Chp. 4 Flashcards
What is demand?
A combination of quantities that someone would be willing and able to buy over a range of possible prices at a given moment.
What is microeconomics?
Branch of economic theory that deals with behavior and decision making by small units such as individuals and firms.
What is a demand schedule?
Listing showing the quantity demanded at all possible prices that might prevail in the market at a given time.
What is an incentive?
Something that motivates.
What is a demand curve?
Graph showing the quantity demanded at each and every possible price that might prevail in the market at a given time.
What does the Law of Demand state?
More will be demanded at lower prices and less at higher prices; an inverse relationship between price and quantity demanded.
What is a market demand curve?
Demand curve that shows the quantities demanded by everyone who is willing and able to purchase a product at all possible prices at one moment in time.
What is marginal utility?
Additional satisfaction or usefulness obtained from acquiring or consuming one more unit of a product.
What is diminishing marginal utility?
Decrease in additional satisfaction or usefulness as additional units of a product are acquired.
What is a change in quantity demanded?
Movement along the demand curve showing that a different quantity is purchased in response to a change in price.
What is the income effect?
Portion of a change in quantity demanded caused by a change in a consumer’s income when the price of a product changes.
What is the substitution effect?
Portion of a change in quantity demanded that is due to a change in the relative price of the good.
What is a change in demand?
Different amounts of a product are demanded at every price, causing the demand curve to shift to the left or to the right.
What are substitutes?
Competing products that can be used in place of one another; products related in such a way that an increase in the price of one increases the demand for the other.
What are complements?
Products that increase the use of other products; products related in such a way that an increase in the price of one reduces the demand for both.
What is elasticity?
A measure of responsiveness that tells us how a dependent variable responds to a change in an independent variable.
What is demand elasticity?
Extent to which a change in price causes a change in the quantity demanded; has three cases: elastic, inelastic, and unit elastic.
What is elastic demand?
Type of elasticity in which a change in the independent variable results in a larger change in the dependent variable.
What is inelastic demand?
Case of demand elasticity where the percentage change in the independent variable causes a less than proportionate change in the dependent variable.
What is unit elastic demand?
Elasticity where a change in the independent variable generates a proportional change of the dependent variable.
