law of demand
consumers buy more of a good when its price decreases and less when its price increases
demand
the desire to own something and the ability to pay for it
substitution effect
when consumers react to an increase in a good’s price by consuming less of that good and more of other goods
income effect
the change in consumption resulting from a change in real income
The law of demand is the result of what two overlapping patterns?
substitution effect and income effect
demand schedule
a table that lists the quantity of a good a person will buy at each different price
market demand schedule
a table that lists the quantity of a good all consumers in a market will buy at each different price
demand curve
a graphic representation of a demand schedule
ceteris paribus
a Latin phrase that means “all other things held constant”
normal good
a good that consumers demand more of when their incomes increase
inferior good
a good that consumers demand less of when their incomes increase
complements
two good that are bought and used together
substitutes
goods used in place of one another
elasticity of demand
a measure of how consumers react to a change in price
inelastic
describes demand that is not very sensitive to a change in price
elastic
describes demand that is very sensitive to change in price
unitary elastic
describe demand whose elasticity is exactly equal to 1
total revenue
the total amount of money a firm receive by selling goods or services
What are the causes of a shift in demand? (4)
income, consumer expectations, population, consumer tastes and advertising
