ECO 2301 - Test 1
Terms
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- What are demand schedules?
- tables that show the relationship between the price of a product and the quantity of the product demanded
- What is a demand curve?
- a curve that shows the relationship between the price of a product and the quantity of the product demanded
- What is market demand?
- the demand by all consumers of a given good or service.
- what is law of demand?
-
the inverse relationship between the price of a product and the quantity of the product demanded.
//Holding everything else constant, when the price of a product falls, the quantity demanded of the product will increase, and when the price of the product rises, the quantity demanded of the product will decrease.// - what is the substitution effect?
- the substitution effect refers to the change in the quantity demanded of a good that results from a change in price, making the good more or less expensive relative to other goods that are substitutes.
- The substitution effect and the income effect happen (separately/simultaneously)?
- Simultaneously whenever a price changes. Although they can be analyzed separately, their effects cannot be measured individually.
- What is the ceteris paribus condition?
- what economists refer to as the necessity of holding all variables other than price constant in constructing a demand curve.
- Ceteris paribus is latin for...
- "all else equal."
- A shift of a demand curve is an increase/decrease in...
- demand.
- A movement along a demand curve is an increase/decrease in...
- the quantity demanded.
- What are variables that shift market demand?
-
PIPET
PRICES - of related goods (substitutes or complements)
INCOME - can increase/decrease
POPULATION - and demographics (old/young, population inc/dec)
EXPECTATIONS - of future pricing (can inc/dec)
TASTES - preferences, can be influenced by media. - What is a normal good?
- a good that demand increases for following a rise in income, and demand decreases for following a fall in income.
- What is an inferior good?
- A good that demand decreases for following a rise in income, and that demand increases for following a fall in income.
- What are complements?
- Gooda and services that are used together - such as hot dogs and hot dog buns. When 2 goods are complements, the more consumers buy of one, the more they will buy of the other.
- What are demographics?
- The demographics of a population refers to its characteristics, with respect to age, race, and gender.
- What is quantity supplied?
- the amount of a good or service that a firm is willing and able to supply at a given price.
- What is a supply schedule?
- A table that shows the relationship between the price of a product and the quantity of the product supplied.
- What is a supply curve?
- A supply curve shows the relationship between the price of a product and the quantity of the product supplied.
- What is the law of supply?
- The law of supply states that holding everything else constant, increases in price cause increases in the quantity supplied, and decreases in price cause decreases in the quantity supplied.