Microeconomics - 1.2 Flashcards
What is demand?
Demand is the quantity of a good that consumers are willing and able to buy at a given price at a given time.
What is the demand curve?
Represents the quantity that is demanded at any given price - curve faces downwards like \
What is extension of demand?
Quantity of a good increases because price falls
What is contraction of demand?
Quantity demanded for a good falls as price rises.
What is the acronym to remember the conditions of demand?
PASIFIC
What do the conditions of demand stand for?
Population
Advertisement
Substitute goods
Income
Fashion/Trends
Income tax
Complimentary goods
What is derived demand?
The demand for a factor of production that results from the demand for the product that it is used to make
What is an inferior good?
When an increase in income leads to a fall in demand.
What is a normal good?
When an increase in income leads to an increase in demand.
What is the Law of Demand?
When the price of a good rises, the quantity demanded will fall.
In order to simplify the decision making process, economists assume…
decisions are taken at the margin. This is looked in at isolation.
What is marginal utility?
Change in total satisfication from consuming an extra unit of a good.
Diminishing Marginal Utility -
As successive units of a good are consumed, the utility from each extra unit will fall.
What is the Law of Diminishing Marginal Utility?
The value or utility that individual consumers gain from the last product consumed falls, the greater the number consumed
