social 12 (econ)- chapter 3 Flashcards
the amount of a good or service that a consumer is willing and able to buy at various possible prices during a given time period
demand
the amount of a good or service that a consumer is willing and able to buy at each particular price during a given time period
quantity demanded
an increase in a goods price causes a decrease in the quantity demanded and that a decrease in price causes an increase in the quantity demand.
law of demand
the amount of money, or income, that people have available to spend on goods and services
purchasing power
any increase or decrease in consumers’ purchasing power caused by a change in price
income effect
describes the tendency of consumers to substitute a similar, lower priced product for another product that is more expensive
substitution effect
the natural decreases in the utility of a good or service as more units of it are consumed
diminishing marginal utility
a table that shows the level of demand for a particular item at various prices
demand schedule
a graphic representation of a demand schedule, showing the relationship between the price of an item and the quantity demanded during a given period, with all other things being equal.
demand curve
a nonprice factor that influences the amount of demand for a good or service.
determinants of demand
goods that can be used to replace the purchase of similar goods when prices rise
substitute goods
goods that are commonly used with other goods
complementary goods
the degree to which changes in a good’s price affect the quantity demanded by consumers
elasticity of demand
exists when a small change in a good’s price causes a major opposite change in the quantity demanded (drop)
elastic demand
exists when a change in a good’s price has little impact on the quantity demanded (increase)
inelastic demand
refers to the total income that a business receives from selling its products
total revenue
five causes that cause shift in demand:
- consumer tastes and preferences
- market size
- income
- prices of related goods
- consumer expectations
markets expand and contract for what three reasons?
- decisions made by businesses
- decisions made by government
- technology
what are the three reasons why the elasticity of a good can change?
- the product is not a necessity
- there are readily available substitutes
- the product’s cost represents a large portion of consumers income
what are the three reasons why a good has inelastic demand?
- the product is a necessity
- there are few or no readily available substitutes
- the product’s cost represents a small portion of consumers’ income
