Econ chapter 4
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