Demand Ch2. Flashcards Preview

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Flashcards in Demand Ch2. Deck (23):
1

Market

Any place where, or mechanism by which, buyers and sellers interact to trade goods, services, or resources.

2

Good

A tangible product that consumers, firms, or governments wish to purchase.

3

Service

An intangible product or action that consumers , firms, or governments wish to purchase.

4

Resource

Any item , whether a gift of nature, the result of production, or the result of human effort, that is used to produce goods and services.

5

Law of demand

As the price of a good rises, the quantity will fall, and vice versa, all else held constant.

6

Demand schedule

A TABULAR representation of the price of a good vs. the quantity that firms and individuals are willing and able to buy.

7

Demand Curve

A GRAPHICAL representation of the price of a good vs. the quantity that firms and individuals are willing and able to buy.

8

Quantity Demanded

The quantity firms, consumers, and governments are willing and able to pay at a given price.

9

Change in quantity demanded

The change in the quantity that firms, consumers, and governments are willing and able to buy DUE TO A CHANGE IN ITS PRICE.

10

Income effect

The effect that a change in price has on the purchasing power of income. (gas prices go up, I buy less)

11

Substitution effect

The effect that a change in the price has on the DEMAND FOR ANOTHER. (dues to apple price going up, I buy oranges for lunch)

12

Diminishing marginal utility

The NEGATIVE relationship between the quantity of a good and the marginal utility obtained from EACH ADDITIONAL unit consumed in a period.

13

Market demand

The overall or TOTAL demand for a good. The summation of individual demand curves ( 100 sunglass demand in Fl, 25 Cali = 125 Market demand for sunglasses)

14

Increase in demand

An increase in quantity demanded at every price point. ( Rightward shift of demand curve [more units])

15

Decrease in demand

A decrease in the quantity demanded at every price. ( Leftward shift of demand curve [less units created])

16

Normal good

A good for which there is a DIRECT relationship between income and demand. ( More money = more demand)[Ham]

17

Inferior good

Inverse relationship between income and demand. (More money= less demand){Bologna)

18

Taste and preferences

The perception of the desirability associated with consuming a good, service, or resource.

19

Buyers

Market participants who seek to obtain goods, services, and resources.

20

Expectations

The anticipation by individuals and firms of costs and benefits that lie in the future. ( Pops worth more when vaulted; buy now)

21

Substitutes

Goods, services, resources that are viewed as replacements for one another.

22

Complements

Goods, services, or resources that are used or consumed with one another. ( Peanut butter & Jelly)

23

Determinants of Demand

Income, Taste and preference, Number of buyers, Expectations, Substitutes, and Compliments.