Chapter 4 Flashcards
the relationship between a good’s price and the amount that people are willing to pay
demand
the relationship between a good’s price and the amount that producers are willing to provide for consumers
supply
two types of value
value in exchange
value in use
value that is directly related to the benefits their owners receive through their use
value in use
what a particular good is worth in exchange for some other good
value in exchange or trading value of a good
the amount of money that a buyer pays the seller for a particular item
price
prices at which goods can be sold in an open market with many potential seller and buyers
market prices
states that as one’s supply of a specific good or service increases, the satisfaction derived from each additional unit tends to decrease
diminishing marginal utility
the amount of satisfaction that results from a one-unit increase of a product
marginal utility
the total amount of satisfaction received from possessing a particular amount of a good
total utility
law that states:
“ Other things remaining equal, as the price of a good increases, the quantity demanded decreases in a free market economy”
law of demand
says that when the price of a good falls, consumers tend to buy more of that good or of other items because they can do so without giving up anything
income effect
indicates that people tend to substitute less expensive goods for ones whose prices have risen
explains why consumers’ expenses may not increase much when prices rise
substitution effect
for everyone there is a point at which _________ becomes the decisive consideration,
PRICE
a list of numbers that compares price with quantity demanded
demand schedule
a graphic representation of the quantity of goods purchased at different prices
demand curve
slope for demand on a graph
downward and to the right
the five key factors that can shift the demand curve (change in demand)
- tastes and preferences
- income
- population
- prices of related goods
- Consumer expectations
a good whose demand is directly related to consumers’ incomes
normal good
demand for these items decreases as consumers’ incomes increase or vice versa
inferior goods
a good capable of being used in place of another
substitutes
a good often used in conjunction with another
complement
the only factor that causes a change in quantity of demand
price
law that states the direct relationship between the price and the amount suppliers make available:
“Other things remaining equal, as the price of a good increases, the quantity supplies also increases in a free market economy”
law of supply
