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27 Cards in this Set
- Front
- Back
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Any place where people come together to buy and sell goods or services is called _________?
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A Market
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What do we call the willingness and ability of buyers to purchase different quantities of a good at different prices during a specific time period/
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Demand
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A law stating that as the price of a good increases, the quantity demanded of the good decreases, and that as the price of a good decreases, the quantity demanded of the good increases.
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Law of Demand
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The number of units of a good purchased at a specific price
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Quantity Demanded
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A law stating that as a person consumes additional units of a good, eventually the utility gained from each additional unit of the good decreases
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Law of Diminishing Marginal Utility
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The numerical representation of the law of demand
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Demand Schedule
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The graphical representation of the law of demand
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Demand Curve
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In what direction does a demand curve slope curve?
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Downward from left to right
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When demand increases, what direction does the demand curve shift?
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Demand curve shifts rightward
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When demand decreases, in what direction does the demand curve shift?
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Demand curve shifts leftward
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Does the demand curve shift when there is a change in "quantity demand"
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No, there is only movement up or down along the original demand curve
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A good for which demand rises as income rises and falls as income falls
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Normal good
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A good for which the demand falls as income rises, and rises as income falls
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Inferior good
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A good for which the demand remains unchanged as income rises or falls
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Neutral good
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What 5 factors cause demand curves to shift?
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1. Income
2. Preferences 3. Prices of Related Goods 4. Number of Buyers 5. Future Price |
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A similar good.
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"Substitute"
With substitutes, the price of one and the demand for the other move in the same direction |
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A good that is consumed jointly with another good.
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"Complement"
With complements, the price of one and the demand for the other move in opposite directions. |
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What factor causes a change in quantity demanded?
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Price
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The relationship between the percentage change in the quantity demanded and the percentage change in price
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Elasticity of Demand
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The type of demand that exists when the percentage change in quantity demanded is greater that the percentage change in price
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Elastic Demand
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The type of demand that exists when the percentage change in quantity demanded is the same as the percentage change in price
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Unit-Elastic Demand
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How do we compute elasticity of demand? (what is the formula?)
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Elasticity of Demand =
%change in Quantity Demanded/ (divided by) % change in price |
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What four factors can change the elasticity of demand?
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1. Number of substitutes available
2. Luxuries vs. Necessities 3. Percentage of income spent on the good 4. Time |
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Elastic Demand + Price Increase =
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Total Revenue Decrease
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Elastic Demand + Price Decrease =
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Total Revenue Increase
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Inelastic Demand + a Price Increase =
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Total Revenue Increase
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Inelastic Demand + a Price Decrease =
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Total Revenue Decrease
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