ECON: Unit 2: Ch 4 Flashcards

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0
Q

Demand

A

Desire to purchase an item at a specific price, time, with the ability and willingness to pay
Microeconomic concept
Central to what/how/ for whom process
2 variables: price and quantity of a specific process at a given point in time

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1
Q

Symbols

A
P, price
D, demand
S, supply
Delta, change
Y, income
QD, quantity demanded
QS, quantity supplied
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2
Q

Quantity

A

One specific point stating how many units are demanded At a specific price

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3
Q

General demand

A

Serious of points stating how many units are demanded at various prices

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4
Q

Demand schedule

A

Quantity of demand varies with price

Collected data in a table

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5
Q

Demand curve

A

Line graph that shows amount of product that will be purchased at each price
Price on y axis, quantity demanded on x

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6
Q

Ceteris paribus

A

All other things being equal
Can only change one factor at a time to see what will happen to supply and demand
Studying short term affects

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7
Q

Law of demand

A

Quantity of demand varies inversely with its price

High demand, low price

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8
Q

Market demand

A

Shows quantities demanded by everyone who is interested in purchasing the product

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9
Q

Marginal utility

A

Extra usefulness or additional satisfaction a person gets from acquiring or using one more unit of a product

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10
Q

Diminishing marginal utility

A

Principle at states that the extra satisfaction we get from using additional quantities of a product begins to decline

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11
Q

Change in price…

A

Equal to change in quantity demanded

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12
Q

Income effect

A

Change in QD because of change in price that alters consumers real income

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13
Q

Substitution effect

A

Change in QD because of change in relative price of product

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14
Q

Change in demand factors

A
  • results in entirely new demand curve
  • consumer income, consumer taste(ads, season), substitutes price change, complements price change, expectations of price, number of consumers
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15
Q

Elasticity

A

The general measure of responsiveness, cause effect relationship
The extent to which a change in price causes a change in the quantity demanded

16
Q

Elastic

A

Change in price causes a larger change in quantity demanded

17
Q

Inelastic

A

Change In price is smaller than quantity demanded

18
Q

Unit elastic

A

Change in price causes proportional Change in quantity demanded

19
Q

Determinants of demand elasticity

A

Can the purchase be delayed? : can’t, inelastic…can, elastic (luxury)
Are adequate substitutes available? : yes, elastic…no, inelastic
Does the purchase use a large portion of income? Yes, elastic…no, inelastic
Is it durable? Yes, elastic…no, inelastic

20
Q

Coefficient method

A
Price elasticity = % change QD/%change in P 
0-0.99999 inelastic
1 unit elastic
>1 elastic
Ignore negatives
21
Q

Calculating percent changes

A

QDnew-QDold/QDold
Pricenew-price old/price old
%changeQD/%change price