Econ Chapter 4

Describe the relationship between the demand schedule and demand curve.

Both provide information about demand-the schedule in the form of a table and the curve in the form of a graph

Describe how the slope of the demand curve can be explained by the principle of diminishing marginal utility.

Diminishing marginal utility says that as we use more of a product, we are not willing to pay as much for it. People will not pay as much for the second and third product as they will for the first.

What does a market demand curve illustrate?

How the quantity that all interested persons (the market) will demand varies depending on the price of a good or service

The change in quantity demanded shows

a change in the amount of the product purchased when there is a change in price

Changes that changes people's willingness and ability to buy.

a change in the quantity demanded and a change in demand.

Why is price a consumer's obstacle to buying?

a consumer's money is limited, and the price of a product forces the consumer to determine how much his or her demand is for the product

When the demand data is graphed, it forms what?

a demand curve with a downward slope

Demand # 1

a willingness to buy a product at a certain price

Only those people with demand can

compete with others who have similar demands

The income effect means that as prices drop,

consumers are left with extra real income.

Demand Curve

graphical representation of the quantities that people are willing to purchase at all possible prices that might prevail in the market.

Microeconomics helps explain what?

how prices are determined and how individual economic decisions are made

What does an individual demand curve illustrate?

how the quantity that a person will demand varies depending on the price of a good or service.

Economists analyze demand by what?

listing prices and desired quantities in a demand schedule

What kind of concept is demand

microeconomic

The substitution effect means that price can cause consumers to

substitute one product with another similar but cheaper item.

In order for demand to be counted in the marketplace, desire is not enough; it must coincide with

the ability and willingness to pay for it

Microeconomics

the area of economics that deals with behavior and decision making by small units, such as individuals and firms

Demand #2

the desire to have or to own a certain product

Marginal utility

the extra usefulness or satisfaction a person receives from getting or using one more unit of a product

The Law of Demand states what?

the quantity demanded of a good or service varies inversely with its price. When price goes up, the quantity demanded goes down; when price goes down, the quantity demanded goes up.

Diminishing marginal utility

the satisfaction we gain from buying a product lessens as we buy more of the same product