Economics C4: Demand
Terms
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- What is Demand? p.79
- The desire to own something and the ability to payfor it.
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What is the Law of Demand?
p.80 - Consumers buy more of a good when its price decreases and less when its price increases.
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What is the Substitution Effect?
P. 80 - When consumers react to an increase in a good's price by consuming less of that good and more of other goods.
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What is the Income Effect?
p. 80 - The change in consumption resulting from a change in real income
- What is a Demand Schedule? p.81
- A table that lists the quantity of a good a person will buy at each different price.
- What is a Market Demand Scedule? p. 83
- A table that lists the quantity of a good that all consumers in a market will buy at each different price.
- What is a Demand Curve? p.83
- A graphic representation of a demand schedule
- What does "Ceteris Paribus" mean?
- A Latin phrase for "all other things held constant"
- What is a Normal Good?
- A good that consumers demand more of when their incomes increase.
- What is an Inferior Good?
- A good that consumers demand less of when their incomes increase.
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What are Complements?
p. 88. - Two goods that are bought & used together.
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What are Substitutes?
p. 88. - Goods used in place of one another.
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What is Elasticity of Demand?
p. 92 -
A measure of how consumers react to a change in price.
Formula/Calculating Elasticity is:
E = %Change in Qty. Demanded divided by %Price Change -
What is an Inelastic Demand?
p. 92 - Describes a demand that is not very sensitive to a change in price.
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What is Unitary Elastic?
p. 91 - Describes demand whose elasticity is exactly equal to 1.
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What is Total Revenue?
p. 95. - The total amount of money a firm recieves by selling goods/services.
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What factors produce Elastic Demand?
p. 95 -
1. availability of substitute goods
2. a limited budget that does not allow price changes
3. the perception of the good as a luxury item