Demand 3.1-2 Flashcards
What is a demand schedule?
A table showing the relationship between the price of a good and the quantity of the good demanded, ceteris paribus, or all other things constant.
What is the graphical representation of a demand schedule?
Demand curve
What does the demand curve show?
A graph showing the relationship between the price of a good and the quantity of the good that consumers are willing and able to purchase in a given period of time, ceteris paribus.
What is the law of demand?
The behavior of price and quantity demanded is called the law of demand.
In what direction does the demand curve slope?
A demand curve is downward sloping, meaning that as the price of a good falls, the quantity demanded increases and as the price of a good increases, the quantity demanded decreases.
What is the substitution effect?
Demonstrates the law of demand by showing that as the price of a good rises, consumers will buy more substitute goods and less of the good in question.
What is the income effect?
Means that an increase in the price of a good is, in effect, a decrease in a consumer’s income.
The law of demand is supported by what two effects?
The substitution and income effect
As price rises, consumers will be less able to purchase a product. This is called?
Income effect
As price rises, consumers will seek substitutes. This is called?
Substitution effect
As the price of a good increases, the quantity demanded will?
Decrease
As price of a good falls, the quantity demanded will?
Increase
