Demand

market demand curve

A summation of all the individual demand curves in a given market. It shows the quantity demanded of the good by all individuals at varying price points.

complements

A complementary good or complement is a good with a negative cross elasticity of demand, in contrast to a substitute good. This means a good's demand is increased when the price of another good is decreased. Conversely, the demand for a good is decreased when the price of another good is increased.

demand schedule

A demand schedule is a tabulation of the quantity of a good that all consumers in a market will purchase at any given price. Generally, there is an inverse relationship between the price and the quantity demanded.

change in quantity demanded

An increase in quantity demanded is caused by: a decrease in the price of the product. A demand curve illustrates how much the quantity demanded changes when the price changes. A change in quantity demanded is represented as a movement along a demand curve.

change in demand

Change in demand describes a change or shift in a market's total demand. This change in demand is represented graphically in a price vs. quantity plane, and it is a result of more or fewer entrants into the market and changes in consumer preferences. The shift can either be parallel or nonparallel.

substitutes

Substitute goods are two goods that could be used for the same purpose. If the price of one good increases, then demand for the substitute is likely to rise.

marginal utility

The additional satisfaction a consumer gains from consuming one more unit of a good or service. Marginal utility is an important economic concept because economists use it to determine how much of an item a consumer will buy.

demand curve

A graph showing how the demand for a commodity or service varies with changes in its price.

diminishing marginal utility

A law of economics stating that as a person increases consumption of a product while keeping consumption of other products constant, there is a decline in the marginal utility that person derives from consuming each additional unit of that product.

income effect

The income effect is the change in demand of a good or service brought on by a change in a consumer's discretionary income. The income effect can be observed under two scenarios: if a person's aggregate level of income increases or if the relative price of goods decreases.

law of demand

The law of demand is a microeconomic law that states, all other factors being equal, as the price of a good or service increases, consumer demand for the good or service will decrease, and vice versa.

substitution effect

The substitution effect is the economic understanding that as prices rise — or income decreases — consumers will replace more expensive items with less costly alternatives.