Demand Flashcards
essay is on ethics and economic systems... use exam for essay!!!!
An institution of arrangement which brings together buyers and sellers of related goods, services and or resources to do business with each other
Market
Consumers, Businesses, and Government are..
Market Participants
___ are trying to obtain the maximum return from the scarce resources they have.
Market Participants
A market that has many buyers and many sellers so no single buyer or seller can influence there price.
Competitive Market
the ration of its money price to the money price of the next best alternative good –is its opportunity cost
relative price
Various amounts of a product or service consumers are willing and able to purchase at each possible price during a specified period of time
Desire + Ability and willingness to pay
Demand
A good or service is the amount that consumers plan to buy during a given time period at a particular price.
quantity demanded
Shows the relationship between the quantity demanded of a good and its price
- shows the extent and intensity of Demand
- the smaller the quantity available, the higher is the price that someone is willing to pay for another unit.
Demand curve
lists of quantities demanded at each different price
Demand schedule
Each of us has a demand for a good or service if we are willing and able to pay for it.
The amount we buy depends on its price.
–if the price goes up, we buy less
–if the price goes down, we buy more
Individual Demand
The collective summation of all buyers’ individual demands
Market Demand
As a price falls, quantity demanded rises and vice versa
Shows the inverse relationship between price and demand
Law of Demand
Things that influence demand at each and every price
- number of consumers
- consumer tastes
- consumer income
- price and availability of substitutes
- price of complements
- consumer expectations
- market population
Determinants of demand
A good that can be used in place of another good
substitute
a good that is used in conjunctive with another good
conjunctive
When any factor that influences buying plans other than the price of the good changes, there is a ____.
an increase in demand causes the demand curve to shift rightward.
a decrease in demand caused the demand curve to shift leftward
a Change in demand
Taste for the good increases income increases price of a substitute rises price of a complement falls future prices are expected to rise number of consumers increases
Demand increases and shift right when these things happen and vise versa
A movement along a demand curve, which results from a change in price, shows a ___
Change in quantity demanded
If any one of the determinants of demand changes, holding price constant, there is a ___
Change in demand
When the price of the good changes and everything else remains the same, there is a ____
quantity demanded and a movement along the demand curve
When one of the other factors that influence buying plans changes, there is a
change in demand and a shift of the demand curve
Movement along the curve: buyer’s behavior does not change, Buyers only react to a price change
Shift the curve: buyers’ behavior does change
Movements vs Shifts
a product whose demand varies directly with income (superior good)
as income increases, the amount of these goods purchased increases
normal good
product whose demand varies inversely with money income
as income increases, the amount of a good purchased decreases
inferior good
a lower price increases purchasing power of a buyer’s money income, enabling the buyer to purchase more of the product than could be purchased before, and vice versa
Shows impact of a change in price on consumer’s real income and consequently on quantity of product demanded
Decrease in price means more real income is available to bring subsequent amounts of the product and vice versa
income effect
household income expressed as the quantity of goods a household can afford to buy
real income
at a lower price, buyers have the incentive to substitute the cheaper good for similar good which is relatively more expensive and vise versa
A higher price, substitute good supply is decreased raising prices for the substitute good
Shows impact of a change in product’s price on its expensiveness relative to other substitute products’ prices
higher price for a particular product with no change in price of substitutes means item has become relatively more expensive compared to substitutes
substitution effect
When the relative price (opportunity cost) of a good or service rises, people seek substitutes for it, so the quantity demanded decreases.
substitution effect
when the price of a good or service rises relative to income, people cannot afford all the things they previously bought, so the quantity demanded decreases
income effect
substitution effect contributes to increase quantity demanded because consumer substitutes moreof the good for other goods
normal good - when price declines
increases consumer’s ability to buy goods (increasing purchasing power), increasing QD because of income effect
normal good - when price declines
consumer’s substitute more of inferior goods for other goods because price decreases relative to them, QD increases because of substitution effect
Inferior good - when price declines
lower price effectively makes consumer’s richer but because good is inferior, QD decreases
inferior good - when price declines
