Chapter 4 Economics

Elasticity formula

% change in quantity demanded/% change in price

When hot dogs are on sale the demand for hot dog buns rises, why is this?

Because hot dogs and hot dog buns are examples of complements.

Does a change in a price of a good cause the curve to shift?

No, goes with movement of the curve.

Why is the market demand schedule created?

To help predict total sales (demand) at several different prices

ceteris paribus

a Latin phrase that means "all other things held constant"

inferior good

a good that consumers demand less of when their income increases

normal good

a good that consumers demand more of when their income increases

elasticity of demand

a measure of how consumers respond to price changes

demand schedule

a table that lists the quantity of a good a person will buy at various prices in a market

market demand schedule

a table that lists the quantity of a good all consumers in a market will buy at various prices

I always buy my medication even if it costs $300.00, this is an example of what?

an inelastic demand

law of demand

consumers will buy more of a good when its price is lower and less when its price is higher

inelastic

describes demand that is not very sensitive to price changes ;less than 1

elastic

describes demand that is very sensitive to change in price ;more than 1

unitary elastic

describes demand whose elasticity is exactly equal to 1

I stopped buying lotto tickets because they got too expensive. This product is an example of

elastic demand

substitutes

goods that are used in place of one another

demand curve

graphic representation of a demand schedule

Coke costs $2.00 more than Pepsi, I decide to buy Pepsi. What are these products considered?

substitutes

income effect

the change in consumption that results when a price increase causes real income to decline

demand

the desire to own something and the ability to pay for it

total revenue

the total amount of money a company receives by selling goods or services

demographics

thee statistical characteristics of populations and population segments, especially when used to identify consumer markets

complements

two goods that are bought and used together

substitution effect

when consumers react to an increase in a good's price by consuming less of that good and more of a substitute goods