chapter 4 Flashcards Preview

econ > chapter 4 > Flashcards

Flashcards in chapter 4 Deck (18):
1

Total Revenue

The total amount of money a firm receives by selling goods or services

2

Demand

The desire to own something and the ability to pay for it

3

law of demand

states that consumers buy more of a good when it’s price decreases and less when price increases

4

Substitution effect

when consumers react to an increase in a goods price by consuming less of that good and more of other goods

5

income effect

the change in consumption resulting from a change in real income

6

demand schedule

a table that lists the quantity of a good a person will buy at each different price

7

demand curve

a graphic representation of a demand

8

Ceteris Paribus

all other things held constant

9

elasticity of demand

measure of how consumers react to a change in price

10

inelastic

describes demand that is not very sensitive to a change in price

11

elastic

describes demand that is very sensitive to a change in price

12

unitary elastic

describes demand whose elasticity is exactly equal to one

13

inferior goods

a good that consumers demand less of when their incomes increase

14

market demand schedule

a table that lists the quantity of a good all consumers in a market will buy at every different price

15

What factors affect elasticity?

1. availability of substitutes
2. relative importance/ limited budget
3. necessities vs. luxuries
4. change over time

16

The price of a slice of pizza has just increased by $1.00 from an earlier low price. Based on Ashley's demand curve on figure 4.4, which of the following statements is true?

Ashley will buy 2 fewer slices of pizza

17

According to figure 4.4, what is Ashley's elasticity of demand as the cost changed from $2.00 to $1.00?

2

18

A new restaurant has opened. Ashley's demand for pizza has decreased and her demand curve has shifted. Based on figure 4.4, which combination of price and quantity demanded would you expect to find on new curve?

combination of $2.00, 1 slice