Econ chapter 4

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The laws of demand

1. Substitution effect: changes in price motivates consumer to buy cheaper goods 2. Income effect: changes in price affect purchase power of consumer income 3. Law of diminishing marginal utility: as you continue to consume a given product, ypu will eventually get less additonal utility from each unit you consume

5 shifters of demand

1. Taste/preference 2. # of consumers 3. Price of related goods 4. Income 5. Expectations

Which shows the quantity demand at each price by all consumers

A market demand schedule

Demand schedule

A table that lists the quantity of a good a person will buy at each diff price

Ceteris paribus

All things held constant

What is a companys total revenue

Amount recieved from selling that goods

Income effect

Change in consumption resulting from a change in real income

A shift in demand curve means which of the follwing

Change in demand at every price

Two goods that are bought and used together are _______

Complements

Law of demand

Consumers buy more of a good when its price decreases and less when its price increases

As purchasing power increases the demand for inferior goods _____

Decreases

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

Demand

Used to predict how people will change their buying habits when the price lof a good rises/falls

Demand curve

What type of table list the quantity of a good that may be bought at diff prices

Demand schedule

Demand

Desire to own something and ability to pay for it

Unitary elastic

Elasticity of 1

Complements

Goods that are bought and used together

Substitues

Goods that are used in place of one another

Inferior good

Goods whose demand falls as consumer income increases

Normal good

Goods whoses demand increases as consumer income increases

Demand curve

Graphic representation of a demand schedule

A way in which a consumer can change his or her spending patterns

Income effect

The ______ occurs when an increase in price decreases a consumers real income

Income effect

Demand for goods that are necessitities is usually _______

Inelastic

Elasticity that is less then 1

Inelastic

Which if the following is a good that might not be bought when prices rise

Inferior goods

The law of demand

Inverse relationship between price and quantity demanded

When a goods price is lower, comsumers will buy more

Law of demand

As you consume more you get less satisfaction

Law of diminishing marginal utility

What type of system is the US economy based on

Market

Inelastic

Not a very big change in demand and price

Elasticity of demand

Reaction to price change

Elastic

Sensitive demand to price change

What determines the price and quantity of most goods

Supply and demand

Market demand schedule

Table that lists the quantity of a good all consumers in a market wil buy at each diff price

A shifter has what impact on the demand curve

The curve to the shift tight and left

Total revenue

Total money business recieves from buying and selling goods

The market demand curve is only accurate for one very specific set of market conditions

True

When elasticity is equal to 1 it is referred to as _____

Unitary elastic

Substitution effect

When consumers react to an increase in a goods price by consuming less of that good and more of other goods


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