Chp 4 Terms
Microeconomics
branch of economic theory that deals with behavior and decision making by small units such as individuals and firms
Market Economy
economic system where supply, demand, and the price system help people make decisions
complements
related goods; the use of one increases the use of the other
Demand Schedule
shows the various quantities demanded of a particular product at all prices that might prevail in the market at a given time
Law of Demand
states that the quantity demanded of a good or service varies inversely with its price
Market Demand Curve
the demand curve that shows the quantities demanded by everyone who is interested in purchasing the product.
Demand Elasticity
the extent to which a change in price causes a change in the quantity demanded
Marginal Utility
the extra usefulness gained from consuming one more unit of a product
Diminishing Marginal Utility
the principle that our additional satisfaction tends to go down as more and more units are consumed
Income Effect
a change in the quantity demanded because of a change in price that alters a consumer's real income
Change in Demand
a change in the quantity demanded of a good or service at every price; a shift of the demand curve to the left or right.
Elastic
a given change in price causes a larger change in quantity demanded
Inelastic
a given change in price causes a smaller change in the quantity demanded
Demand Curve
a graph showing the quantity demanded at each and every price that might prevail in the market
Elasticity
a measure of responsiveness that tells us how a dependent variable such as quantity, responds to an independent variable such as price
Change in quantity demanded
a movement along the demand curve that occurs in response to a change in price
Demand
Desire, willingness, and ability to buy a product
subsitutes
Products that can be used in place of something else, for example, butter in place of margarine
Substitution Effect
a change in quantity demanded because of the change in the relative price of the product
Unit Elastic
change in price causes a proportional change in quantity demanded