Demand 3.1-1 Flashcards
What is the behavior of consumers in the market?
Demand
What is called the behavior of producers?
Supply
What is the term that means “all other things equal”?
Ceteris Paribus
What is the mathematical relationship that predicts the quantity of a good demanded as a function of several related factors?
Demand Function
What are the components or determinants of demand for a product?
The price of a good, the price of substitute goods, the price of complementary goods, tastes and preferences, a consumer’s income, and expectations about the future.
What is the law of demand?
An observation in the real world that the quantity demanded of most goods and services exhibits and inverse relationship with its price.
What happens to demand when a price of a product decreases?
The quantity demanded of that product increases.
What is a complementary good?
A product used jointly with a good or service. (example: bread and cheese)
What is a substitute good?
A good that meets the same needs as the original product. (example: bread and bagels)
What happens to demand when a price of a product increases?
The quantity demanded of that product decreases.
What type of relationship does price and demand have?
Inversely related
A change in the price of a complement causes demand for a good to change in what direction?
The opposite direction
A change in the price of a substitute causes demand for the original product to change in what direction?
Changes in the same direction
An increase in income increases demand for what type of good?
Normal good
An increase in income decrease demand for what type of good?
Inferior good
