Demand Flashcards
Demand
Desire to own something and the ability to pay for it
Law of Demand
Consumers buy more of a good when its price decreases and less when its price increases
Substitution Effect
When consumers react to an increase in a good’s price by consuming less of that good and more of other goods
Income effect
Change in consumption resulting from a change in real income
Demand Schedule
Table that lists the quantity of a good a person will buy at each different price
Market Demand Schedule
Table that lists the quantity of a good all consumers in a market will buy at each different price
Demand curve
Graphic representation of a demand schedule
Ceteris Paribus
Latin phrase that means “all other things held constant”
Normal Good
Good that consumers demand more of when their incomes increase
Inferior Good
Good that consumers demand less of when their incomes increase
Complements
Two goods that are bought and used together
Substitutes
Goods used in place of one another
Elasticity of Demand
Measure of how consumers react to a change in price
Inelastic
Describes demand that is not very sensitive to a change in price
Elastic
Describes demand that is very sensitive to a change in price
Total Revenue
Total amount of money a firm receives by selling goods or services (P X Q)
Demand Shifters
Population; Price of Related Goods; Income; Consumer Taste and Advertising; Consumer Expectation of Price
Factors Affecting Elasticity of Demand
Availability of Substitutes; Relative Importance; Necessities Versus Luxuries; Change over Time
Formula for Total Revenue
The price of a unit of a good multiplied by the number of units sold (P X Q)
Utility
Economic term for satisfaction
Diminishing Marginal Utility
The more of a good a person uses the less utility they will receive
