Chp 4 Terms

Microeconomics

branch of economic theory that deals with behavior and decision making by small units such as individuals and firms

Market Economy

economic system where supply, demand, and the price system help people make decisions

complements

related goods; the use of one increases the use of the other

Demand Schedule

shows the various quantities demanded of a particular product at all prices that might prevail in the market at a given time

Law of Demand

states that the quantity demanded of a good or service varies inversely with its price

Market Demand Curve

the demand curve that shows the quantities demanded by everyone who is interested in purchasing the product.

Demand Elasticity

the extent to which a change in price causes a change in the quantity demanded

Marginal Utility

the extra usefulness gained from consuming one more unit of a product

Diminishing Marginal Utility

the principle that our additional satisfaction tends to go down as more and more units are consumed

Income Effect

a change in the quantity demanded because of a change in price that alters a consumer's real income

Change in Demand

a change in the quantity demanded of a good or service at every price; a shift of the demand curve to the left or right.

Elastic

a given change in price causes a larger change in quantity demanded

Inelastic

a given change in price causes a smaller change in the quantity demanded

Demand Curve

a graph showing the quantity demanded at each and every price that might prevail in the market

Elasticity

a measure of responsiveness that tells us how a dependent variable such as quantity, responds to an independent variable such as price

Change in quantity demanded

a movement along the demand curve that occurs in response to a change in price

Demand

Desire, willingness, and ability to buy a product

subsitutes

Products that can be used in place of something else, for example, butter in place of margarine

Substitution Effect

a change in quantity demanded because of the change in the relative price of the product

Unit Elastic

change in price causes a proportional change in quantity demanded