Markets Flashcards
What is a market?
Any place where buys of goods and services meet
What is demand?
The quantity of a good or service that a consumer is willing or able to buy at a given price over a given period of time.
What is the income effect?
The fall in price results in a saving of income assume the same number of goods are purchased which then creates an incentive for the consumer to increase the quantity demanded of the good
What is the substitution effect?
As the price of a good increases consumers switch towards a cheaper alternative reducing QD of the good
What is the law of diminishing marginal utility?
The value or utility that an individual consumes gain from the last product consumed falls the greater the number consumed
What is utility?
the benefit/satisfaction derived from the consumption of a given good or service
What is total utility?
The total satisfaction from consumption
What is marginal utility?
The extra satisfaction from the consumption of an extra unit
How do you calculate marginal utility?
Marginal utility=Change in total utility/Change in number of units
