Economics Chapter 4

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Substitution effect

A change in the amount that consumers will buy because they buy substitute goods instead

Market size

If the number of consumers increases or decreases, the market size also changes

Change in quantity demanded

The change in the amount demanded because of a change in price

Income Effect

The change in the amount that consumers will buy because the purchasing power of their income changes

Income effect

The change in the amount that consumers will buy because the purchasing power of their wages change

Substitution effect

The change in the amount that consumers will buy because they buy alternate goods instead

Change in demand

The change that occurs when a change in the marketplace causes consumers to buy different amounts of a good or service at every price

A market demand schedule is a table that illustrates what?

The chart shows how much consumers are willing to pay at each price

How does a Market Demand Schedule differ from an Individual Demand Schedule?

A market demand schedule shows how much of a good or service all consumers are willing and able to buy at each price in a market. Individual Demand Schedule that is a two-column table that follows a predictable format

Demand Curve

An illustration of demand schedule

How does the law of diminishing marginal utility create a downward slope in the demand curve

Because it is using each additional unit of a product during a given period

Consumer Tastes

Because of changing consumer tastes, today's hot trends often become tomorrow's castoffs

Why doesn't aa change in the quantity demanded shift the demand curve

Because the change refers to movement along the curve itself

Inferior Goods

Consumers demand less of when their incomes rise

Normal Goods

Consumers demand more of when their income rises

Complements

Goods and services that are used together, so that a rise in demand for one increases the demand for the other

Substitutes

Goods and services that can be used in place of each other

Substitute Goods

Goods and services that can be used in place of other goods and services to satisfy consumer wants are called substitutes

Complementary Goods

Goods that are used together, so a rise in demand for one increases the demand for the other

Income

If a consumers income changes either higher or lower, that persons ability to buy goods and services also changes

What is the difference between wanting something and having demand for something

It can be an item or service

Law of Diminishing Marginal Utility

It states that the marginal benefit of using each additional unit of a product during a given period will decline

Demand

The desire and ability to purchase an item

What does the law of demand say in regard to price and how much consumers will buy of something?

When the price of a good or service falls, consumers buy more of it

Why is a change in demand sometimes called a shift in demand

Which occurs when a change in the marketplace such as high unemployment prompts consumers to buy different amounts of a good service at every price


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