Unit 2-Microeconomics Demand

demand schedule; market demand schedule

A _____ ____ shows how much of a good or service an individual consumer is willing and able to purchase at each price in a market. A _______ _____ _____ shows how much of a good or service all consumers are willing and able to purchase at each price in a market

demand curve; market demand curve

A _____ ______ shows how much of a g/s an individual consumer will buy at each price. It is a visual representation of the demand schedule. Likewise, a _____ ____ ____ shows how much of a g/s all consumers will buy at each price.

demand; curve

A change in ____ occurs when something prompts the consumers to buy different amounts at completely different prices. This will cause the ____ to shift to the left/right. Left=decrease in D and right=increase in D. So change in Qd=movement b/c of change in price and change in D is a shift.

elastic

An _____ curve is shallow or more horizontal since Qd changes a lot as P changes.

inelastic

An ______ curve is very steep or more vertical since Qd does not change very much as P changes

normal goods; inferior goods

As income rises, we demand more ______ ____ and less ______ ______

substitute g/s; proportion of income; necessities; luxuries

Elasticity is determined by ____ ____: if a good has many subs, then when the price increases, consumers can buy a sub for that item, largely changing Qd. _____ ____ _____: if you have a limited income, and the price of a g/s increases, then your demand will decrease for that item b/c you can no longer afford it. ________: food, water, shelter. Even if prices rise, your demand stays. Qd may go down, however, it will likely not exceed the change in price, so the demand is inelastic. _____: something desired, but not essential to life. Demand for these items are likely elastic. Since they are not needed, consumers will not pay a higher price for these g/s, and Qd will decrease

more; less; income effect; substitution effect

Factors that affect demand: Consumers demand ____ goods at lower prices and _____ goods at higher prices. The ______ _____ makes consumers feel "wealthier" or "poorer" even though their income remains the same. it is the change in the amount that consumers will buy b/c the purchasing power of their income changes. The _____ ______ occurs when consumers react to a change in price by buying a substitute product instead.

income; market size; consumer tastes; consumer expectations; substitute goods; complementary goods

Six factors that cause a change in demand

substitute goods

____ ___-g/s that can be used in place of another g/s

complementary goods

____ _____-when the use of one product increases the use of another

consumer expectations

_____ ______-buy it when it's cheap-expectations of what the market will do in the future can affect your buying decisions for today. If you know that a certain g/s will go on sale at a certain time, then you are more likely to wait to buy until the sale begins

market size

_____ ______-if the # of consumers increases or decreases, so does the size of the market, which can affect demand

income

_____-if you have more available money to spend on g/s, you are more likely to buy and your demand increases. If you have less available income, your purchasing power is limited, and you will not buy as much of a g/s unless it's at a cheaper price

consumer tastes

______ ______ (advertising influences) changes in tastes can affect demand. Fads, trends, styles and fashion are rapidly changing today. B/c people today are always looking for the next new "cool" thing, the demand in the market can change daily

price; quantity demanded; downward; law of diminishing marginal utility

______ will always be on the vertical axis and ________ _______ will always be on the horizontal axis. B/c of the inverse relationship, the demand curve will always be _________ sloping. The ________ ____ ___ ______ _____ reinforces the downward slope. It states that the marginal benefit from using each additional unit of a good or service during a time period declines as each is used-it becomes less satisfying

ceteris paribus; quantity demanded; new point; down; up

_______ ___-all other things constant, all things remaining the same. A change in _____ ___ will increase or decrease b/c of a change in price. This change is shown by a _____ ____ on the curve (it does not cause a shift in the demand curve). As you move _____, it represents an increase in Qd and a decrease in P. As you move up, it represents a decrease in Qd and an increase in P.

demand; law of demand; price; quantity demanded

_______ is the desire to have a good and the ability to purchase it (consumers must be willing and able). The ______ ____ _____ has an inverse, or opposite relationship. This means as ___ (P) goes down, ___ _____ (Qd-how much you're willing and able to buy) goes up, and vice versa.

elasticity of demand; elastic; clothing; inealstic; medicine

________ ___ ______ is a measure of how responsive consumers are to a change in price. A good is _____ if Qd changes significantly as price changes. Many elastic goods are "wants", like ______. A good is _____ if Qd changes little as price changes. Many are "needs," like ______.