Chapter 4 Flashcards
(21 cards)
Demand
the desire to have some good or service and the ability to pay for it.
The Law of Demand
When the price of a good or service falls, consumers buy more of it.
Demand Schedule
a table that shows how much of a good or service an individual consumer is willing and able to purchase at each price in a market.
Market Demand Schedule
how much of a good or service all consumers are willing and able to buy at each price in a market
Demand Curve
a graph that shows how much of a good or service an individual will buy at each price
Market Demand Curve
shows the data found in the market demand schedule
Law of Diminishing Marginal Utility
states that the marginal benefit from using each additional unit of a good or service during a given time period tends to decline as each is used.
Income Effect
the change in the amount that consumers will buy because the purchasing power of their income changes
Substitution Effect
the pattern of behavior that occurs when consumers react to a change in the price of a good or service by buying a substitute product
Change in Quantity Demanded
an increase or decrease in the amount demanded because of a change in price
Change in Demand
when something prompts consumers to buy different amounts at every price
Normal Goods
goods that consumers demand more of when their incomes rise
Inferior Goods
goods that consumers demand less of when their incomes rise
Substitutes
goods and services that can be used in place of each other
Complements
goods that are used together, so a rise in demand for one increases the demand for the other
Elasticity of Demand
a measure of how responsive consumers are to price changes
Elastic Demand
when a change in price, either up or down, leads to a relatively larger change in the quantity demanded
Inelastic Demand
when a change in price leads to a relatively smaller change in the quantity demanded
Unit Elastic
when the percentage change in price and quantity demanded are the same
Total Revenue
a company’s income from selling its products
Total Revenue Test
a method of measuring elasticity by comparing total revenues
