Economics - Chapter 4
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Created by:
mlgreene12 on February 13, 2012
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Description:
Honors Economics
Chapter 4
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17 terms
Terms | Definitions |
|---|---|
 demand | the desire, ability, and willingness to buy a product |
| microeconomics | the area of economics that deals with behavior and decision making by small units, such as individuals and firms |
| demand schedule | a listing that shows the various quantities demanded of a particular product at all prices that might prevail in the market at a given time. |
| demand curve | a graph showing the quantity demanded at each and every price that might prevail in the market |
| law of demand | states that the quantity demanded of a good or service varies inversely with its price (when price goes up, quantity demanded goes down) |
| market demand curve | the demand curve that shows the quantities demanded by everyone who is interested in purchasing the product |
| diminishing marginal utility | states that the extra satisfaction we get from using additional quantities of the product begins to diminish |
| price effect | a movement along the demand curve that shows a change in the quantity of the product purchased in response to a change in price (aka change in quantity demanded) |
| income effect | the change in quantity demanded because of a change in price that alters consumers' real income |
| substitution effect | the change in quantity demanded because of the change in the relative price of the product |
| change in demand | when something happens to cause the demand curve itself to shift; people are now willing to buy different amounts of the product at the same prices. |
| substitutes | two goods for which an increase in the price of one leads to an increase in the demand for the other |
| complements | two goods for which an increase in the price of one leads to a decrease in the demand for the other; the use of one product increases the use of the other |
| elasticity | a measure of responsiveness that tells us how a dependent variable such as quantity responds to a change in an independent variable such as price |
| demand elasticity | the extent to which a change in price causes a change in the quantity demanded |
| inelasticity | means that a given change in price causes a relatively smaller change in the quantity demanded |
| unit elastic | means that a given change in price causes a proportional change in quantity demanded |
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