SS Economics Chapter 3 Vocabulary

Market Size Factors

Decisions by private enterprises (businesses), government policies, and new technology

Elasticity of Demand

Degree to which changes in a good's price affect the quantity demanded by consumers....either elastic or inelastic

Complementary Goods

Products that are commonly used with other goods; When the price of a product falls, the demand for that product's complementary good increases

Total Revenue

Total receipts; the total income that a business receives form selling its good/service If a price increase causes a fall in total revenue, the demand is elastic.

Elastic Demand

When a small change in a good's price causes a major, opposite change in the quantity demanded A with elastic demand is not a necessity. If substitutes are readily available for a given product, it has elastic demand

Inelastic Demand

When a small change in a good's price has little impact on the quantity demanded If substitutes are not readily available for a specific product, it has an inelastic demand.

Diminishing Marginal Utility

as more of a product is consumed, the satisfaction received from consuming more of the product decreases

Substitute Goods

Goods that can be used to replace the purchase of similar goods when prices are on the rise When the price of a product increases, the demand for that product's substitute good increases.

Demand Curve

Graph showing the relationship between the price of a product and the quantity demanded for a specific time period If consumers' incomes rise, the curve shifts to the left

Demand Elasticity Factors

If the product is not a necessity if there are readily available substitute products if the product's cost represents a large portion of the consumer's income

Law of Demand

An inverse or opposite relationship between price and the quantity demanded (An increase in a good's price causes a decrease in the amount of the good) Affected by: income effect, substitution effect, and diminishing marginal utility

Income Effect

Any increase or decrease in consumers' purchasing power caused by a change in price

Non-price Determinant of Demand

Consumer expectations, consumer tastes and preferences, prices of related goods, market size, and income

Determinants of Demand

Factors that cause an increase or decrease in demand for a good/service; includes consumer tastes and preferences market size income prices of related goods consumer expectations

Demand Scedule

List of quantity of goods that consumers are willing and able to buy at a series of possible prices

Substitution Effect

Tendency of consumers to substitute a similar, lower-priced product for amount product that is relatively more expensive

Demand

The amount of a good or service that a consumer is willing and able to buy in various possible prices. Able-you can afford it. Various-different.

Quantity Demanded

The amount of goods/services that a consumer is willing and able to buy at each particular price during a given time period

Purchasing Power

The amount of income that people have available to spend on products (goods/services)

Utility

The amount of satisfaction a person receives from consuming a product

Price

The key variable affecting demand When the price of a product increases, the demand for that product's substitute good increases. When the price of a product decreases, the demand for that product's complementary good increases.