Economics Chapter 4
Substitution effect
A change in the amount that consumers will buy because they buy substitute goods instead
Market size
If the number of consumers increases or decreases, the market size also changes
Change in quantity demanded
The change in the amount demanded because of a change in price
Income Effect
The change in the amount that consumers will buy because the purchasing power of their income changes
Income effect
The change in the amount that consumers will buy because the purchasing power of their wages change
Substitution effect
The change in the amount that consumers will buy because they buy alternate goods instead
Change in demand
The change that occurs when a change in the marketplace causes consumers to buy different amounts of a good or service at every price
A market demand schedule is a table that illustrates what?
The chart shows how much consumers are willing to pay at each price
How does a Market Demand Schedule differ from an Individual Demand Schedule?
A market demand schedule shows how much of a good or service all consumers are willing and able to buy at each price in a market. Individual Demand Schedule that is a two-column table that follows a predictable format
Demand Curve
An illustration of demand schedule
How does the law of diminishing marginal utility create a downward slope in the demand curve
Because it is using each additional unit of a product during a given period
Consumer Tastes
Because of changing consumer tastes, today's hot trends often become tomorrow's castoffs
Why doesn't aa change in the quantity demanded shift the demand curve
Because the change refers to movement along the curve itself
Inferior Goods
Consumers demand less of when their incomes rise
Normal Goods
Consumers demand more of when their income rises
Complements
Goods and services that are used together, so that a rise in demand for one increases the demand for the other
Substitutes
Goods and services that can be used in place of each other
Substitute Goods
Goods and services that can be used in place of other goods and services to satisfy consumer wants are called substitutes
Complementary Goods
Goods that are used together, so a rise in demand for one increases the demand for the other
Income
If a consumers income changes either higher or lower, that persons ability to buy goods and services also changes
What is the difference between wanting something and having demand for something
It can be an item or service
Law of Diminishing Marginal Utility
It states that the marginal benefit of using each additional unit of a product during a given period will decline
Demand
The desire and ability to purchase an item
What does the law of demand say in regard to price and how much consumers will buy of something?
When the price of a good or service falls, consumers buy more of it
Why is a change in demand sometimes called a shift in demand
Which occurs when a change in the marketplace such as high unemployment prompts consumers to buy different amounts of a good service at every price