Economics Chapter 3 Demand

Front 1

The amount of a good or service that a consumer is wiling and able to buy at each particular price

Back 1

quantity demanded

Front 2

Any increase or decrease in consumers' purchasing power caused by a change in price

Back 2

income effect

Front 3

The tendency of consumers to purchase a similar, lower priced product instead of a relatively more expensive one

Back 3

substitution effect

Front 4

A list which shows the relationship between the price of a good or service and the quantity that consumers demand

Back 4

demand schedule

Front 5

A graph reflecting the relationship between the price of a good or service and the quantity that consumers demand

Back 5

demand curve

Front 6

A nonprice factor that affects demand for a product over time

Back 6

determinant of demand

Front 7

A product that can be used to replace the purchase of similar products when prices rise

Back 7

substitute good

Front 8

A product that is commonly used with other products

Back 8

complementary good

Front 9

Exists when a small change in a good's price has a large impact on the quantity demanded

Back 9

elastic demand

Front 10

When a change in price has little impact on quantity demanded

Back 10

inelastic demand

Front 11

What is the amount of a good or service consumers are willing and able to buy at various prices during a specified time period?

Back 11

demand

Front 12

What is the key variable affecting demand?

Back 12

price

Front 13

According to the law of demand, between what two things is there an inverse (opposite) relationship?

Back 13

price & quantity demanded

Front 14

What do we call any change in a consumer's purchasing power resulting from a change in price?

Back 14

income effect

Front 15

What word refers to the amount of satisfation a person receives from consuming a product?

Back 15

utility

Front 16

When the price of a product increases, the demand for that product's _________ ________ increases.

Back 16

substitute goods

Front 17

When the price of a product falls, the demand for that product's _________ ________ increases.

Back 17

complementary goods

Front 18

A product with _________ demand is not a necessity.

Back 18

elastic

Front 19

A product with _________ demand is a necessity.

Back 19

inelastic

Front 20

What test measures demand elasticity?

Back 20

total revenue

Front 21

What term refers to the amount of money consumers have available to spend on products?

Back 21

purchasing power

Front 22

Does the satisfation from consuming a product increase or decrease as more units of the product are consumed?

Back 22

satisfaction decreases

Front 23

Why does a demand curve only display a "snapshot" of a market?

Back 23

it only represents a specific time period

Front 24

Name the 5 nonprice determinants of demand.

Back 24

•consumer expectations
•consumer tastes and preferences
•prices of related goods
•market size
•income

Front 25

Name 3 things that affect market size.

Back 25

•government policies
•new technology
•decisions by private businesses

Front 26

Which direction will the demand curve shift if consumers' incomes rise?

Back 26

to the right

Front 27

Name 3 things that affect a products' demand elasticity.

Back 27

•whether it has available substitutes
•whether it is a nececessity
•the portion of the consumers' income the product's cost represents

Front 28

What does a product have if substitutes are readily available?

Back 28

elastic demand

Front 29

What does a product have if substitutes are not readily available?

Back 29

inelastic demand

Front 30

If a price increase causes a fall in total revenue, is demand elastic or inelastic?

Back 30

elastic

Front 31

CONSUMER TASTES AND PREFERENCES
is one of the
5 NONPRICE DETERMINATES OF DEMAND.
Please explain. (essay 1)

Back 31

•consumer tastes change:
product popularity rises, so does demand
•product popularity falls, so does demand

Front 32

MARKET SIZE
is one of the
5 NONPRICE DETERMINATES OF DEMAND.
Please explain. (essay 1)

Back 32

•increasing the number of customers increases the demand
•decreasing the number of customers decreases the demand

Front 33

INCOME
is one of the
5 NONPRICE DETERMINATES OF DEMAND.
Please explain. (essay 1)

Back 33

•when income increases, usually demand increases
•when income decreases, usually demand decreases

Front 34

PRICES OF RELATED GOODS
is one of the
5 NONPRICE DETERMINATES OF DEMAND.
Please explain. (essay 1)

Back 34

•product cost rises/demand of substitute rises also
•product cost falls/demand of complementary goods falls also

Front 35

CONSUMER EXPECTATIONS
is one of the
5 NONPRICE DETERMINATES OF DEMAND.
Please explain. (essay 1)

Back 35

•people often buy goods based on what they think will happen

Front 36

What states that there is an inverse relationship between price and quantity demanded of a good? (essay 2)

Back 36

Law of Demand

Front 37

How does INCOME EFFECT relate to the "Law of Demand"?
(essay 2)

Back 37

When price drops, or income increases.....purchasing power increases, and there is an increase in demand (and vise versa).

Front 38

How does SUBSTITUTION EFFECT relate to the "Law of Demand"?
(essay 2)

Back 38

When price increases... ....consumers tend to substitute similar, lower-priced product

Front 39

How does DIMINISHING MARGINAL UTILITY relate to the "Law of Demand"?
(essay 2)

Back 39

Eventually, consumers cannot use any more of a product, no matter how low its price. (The amount of satisfaction an individual receives declines with each additional unit consumed.)

Front 40

Which direction will the demand curve shift if consumers' incomes fall?

Back 40

to the left