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17 Cards in this Set
- Front
- Back
- 3rd side (hint)
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What is Demand? p.79
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The desire to own something and the ability to payfor it.
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usually has direct link to price of something
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What is the Law of Demand?
p.80 |
Consumers buy more of a good when its price decreases and less when its price increases.
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results from two overlapping patterns of behavior, substitution effect & income
effect. |
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What is the Substitution Effect?
P. 80 |
When consumers react to an increase in a good's price by consuming less of that good and more of other goods.
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Ex.If price of pizza increases, buyers may switch to tacos, salads, fruit , etc.
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What is the Income Effect?
p. 80 |
The change in consumption resulting from a change in real income
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operates when price is lowered;
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What is a Demand Schedule? p.81
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A table that lists the quantity of a good a person will buy at each different price.
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A table comparing purchase costs between quantity and price.
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What is a Market Demand Scedule? p. 83
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A table that lists the quantity of a good that all consumers in a market will buy at each different price.
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all demand schedules & curves reflect the law of demand.
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What is a Demand Curve? p.83
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A graphic representation of a demand schedule
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can shift (left/right) due to changes in factors other than price (ie. population increase/decrease, factory closing, et. al.)
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What does "Ceteris Paribus" mean?
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A Latin phrase for "all other things held constant"
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no variables other than price had changed
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What is a Normal Good?
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A good that consumers demand more of when their incomes increase.
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buying a steak or lobster instead of hamburger meat due to a bonus or pay increase
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What is an Inferior Good?
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A good that consumers demand less of when their incomes increase.
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goods purchased in small amounts or not at all if your income rises and you could afford a better good (i.e., used cars, generic foods, soups, etc.)
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What are Complements?
p. 88. |
Two goods that are bought & used together.
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Ex. skis & ski boots, tennis raquets & tennis balls
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What are Substitutes?
p. 88. |
Goods used in place of one another.
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Ex. snowboards in place of skis & ski boots
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What is Elasticity of Demand?
p. 92 |
A measure of how consumers react to a change in price.
Formula/Calculating Elasticity is: E = %Change in Qty. Demanded divided by %Price Change |
two reactions include elastic or inelastic demands
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What is an Inelastic Demand?
p. 92 |
Describes a demand that is not very sensitive to a change in price.
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Examples are medicines.
Percentage Change = Original # - New Number divided by original # then multiplied by 100 |
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What is Unitary Elastic?
p. 91 |
Describes demand whose elasticity is exactly equal to 1.
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An increase or decrease in price will be met by an equal percentage decrease/increase in quantity demanded = 1.
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What is Total Revenue?
p. 95. |
The total amount of money a firm recieves by selling goods/services.
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Determined by two factors: price of goods & quantity sold.
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What factors produce Elastic Demand?
p. 95 |
1. availability of substitute goods
2. a limited budget that does not allow price changes 3. the perception of the good as a luxury item |
Ex. 1. generics vs. name brands
2. wage reduction (fewer hours worked) 3. Choosing a Ford Taurus instead of a Lexus. |
