Chapter 4 Flashcards
(18 cards)
Change in qt demanded
Change in the amount of a products
That consumers will buy b/c of a change in price
Demand
Willingness to buy something and being able to pay for it
Elastic
Quantity demanded changes SIGNIFICANTLY as price changes
Elasticity of demand
Measure of how responsive consumers are to price change
Income effect
Change in the amount consumers will buy because the purchasing power of income changes
Inelastic
Quantity demanded changes LITTLE as price changes
Law of demand
Description of how consumers behave
Substitutes
Goods and services that can be used in place of each other
Substitution effect
Change in the amount that will buy because they buy other goods instead
Total revenue
Company’s income from selling its products
Total revenue test
Method of measuring elasticity by comparing total revenues
Unit elastic
Percent change in price and change in qt demanded are the same
Elastic has substitutes
True, yes
Vera Wang
Wedding dresses
When demanded for a good is elastic the demand curve will look…
Mostly horizontal
What causes a change in demand
Income Market size Consumer expectations Substitute goods Consumer tastes Complementary goods
What are the three factors that affect the elasticity of demand
Substitutes
Income
Necessity vs Luxury
Change in demand
Another word for shift in demand
Occurs when something prompts consumers to buy different amount at every price
