WEEK 4 Flashcards
A relation between the price of a good and the quantity that consumers are willing and able to buy per period, other things constant.
Demand
The quantity of a good that consumers are willing and able to buy per period relates inversely, or negatively, to the price, other things constant.
Law of Demand
When the price of a good falls, that good becomes cheaper compared to other goods, making consumers more willing to substitute that good for other goods.
Substitution Effect of a Price Change
A fall in the price of a good increases the quantity demanded for a second reason. Suppose you earn Php3,000 a week from a part-time job, so Php3,000 is your money income.
Income Effects of a Price Change
The number of pesos a person receives per period, such as Php3,000 per week. is simply a person’s income in money or rather the dollar amount of a person’s income.
Money Income
Measured by the goods and services it can buy; real income changes when the price changes. refers to the income an individual or group receives after an adjustment is applied for inflation (a sustained increase in the price levels of goods and services).
Real Income
A curve showing the relation between the price of a good and the quantity consumers are willing and able to buy per period, other things constant.
Demand Curve
The amount of a good consumers are willing and able to buy per period at a particular price, as reflected by a point on a demand curve.
Quantity Demanded
The relation between the price of a good and the quantity purchased per period by an individual consumer, other things constant.
Individual Demand
The relations between the price of a good and the quantity purchased per period by all consumers in the market, other things constant; sum of the individual demands in the market.
Market Demand
5 FACTORS OF DEMAND
- Changes in Income (the income effect)
- Prices or availability of substitutes (substitution effect)
- Prices or availability of complementary goods
- Changes in the number of buyers
- Changes in taste and preferences
when income goes up, consumers buy more. when income goes down, consumers buy less.
Changes in income (the income effect)
a substitute is a good that can be used in place of another.
Prices or availability of substitutes (substitution effect)
complementary goods are things that are often sold or used together
Prices or availability of complementary goods
more people (buyers), more sales
Changes in the number of buyers
then vs. now
Changes in taste and preferences
5 What Shifts a Demand Curve?
The monetary income of the consumers
The prices of other goods
The number of the composition of consumers in the market
Consumer tastes
Goods are classified into two broad categories, depending on how consumers respond to changes in money income.
Consumer Income
TWO GOODS
Normal good
Inferior good
A good, such as new clothes, for which demand increases, or shifts rightward, as consumer income rises.
Normal good
Inferior good
A good, such as used clothes, for which demand decreases, or shifts leftward, as consumer incomes rise.
Goods, such as tacos and pizza, relate in such a way that an increase in the price of one shifts the demand for another rightward.
Substitutes
Goods such as cars and gasoline, that relate in such a way that an increase in the price of one shifts the demand for the other leftward
Complements
Factors that influence demand ,such as incomes and prices. A change in consumers income expectations can shift the demand curve.
Consumer Expectations
The relationship between quantity demanded and price of goods and services.
Function
A table presenting the quantity demanded for goods and services
Schedule
The graphical presentation of the relationship between quantity demanded and price.
Curve
A relationship between the price of a good and the quantity that producers are willing and able to sell per period, other things constant
Supply
It occurs at the price where the quantity demanded equals the quantity supplied.
Market Equilibrium
5 What shifts a supply curve?
The state of technology and know-how
The prices of resources
The prices of other goods
Producers expectation
The number of producers in the market
