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ECON BUS ch. 3

Terms in this set (31)

Demand
The amount of a good or service that consumers are willing and able to buy at various possible prices during a given period of time
A demand
Lowers the price of an item, the higher the demand for the item the lower price of something, the more people will want and buy that item
Quantity demand
The amount of a good or service that consumers are willing and able to purchase at a particular price
Inverse demand
Increase in price, decrease in demand and vice versa
What are three economic concepts that help explain the law of demand?
Income effect, substitution effect, and diminishing marginal utility
Income affect
The fact that a change in an atom is price has on the consumers ability to purchase goods. Any increase or decrease in the consumers purchasing power caused by a change in price
Purchasing power
The amount of money, or income, that people have available to spend on goods and services
Substitution effect
Consumers tendency to substitute a lower-priced good for similar, higher-priced good. The higher price the more people use substitutes
Diminishing marginal utility
As more units of a product are consumed, the satisfaction received from each client, the units decline. States that each additional purchase of a product or service by a given consumer will be less satisfying than the previous purchase
Demand schedule
A table that shows the level of demand for a particular item at various prices, a table shows how much of a good or service consumers will want to buy at different prices
Demand curve
A graphic representation of a demand schedule, showing the relationship between the price of an item and the quantity demand during a given period, with all other things being equal; way to show the relationship between the price of a product and the quantity of a Product
What are three factors that affect?market size?
Private businesses decisions, consumer expectations, and income
As income rises, demand for goods:
Decreases
Change in any of the detriments of demand:
Results in an increase in the amount of goods available in the market
Which statement reflects the inverse relationship between quantity demand and price?
As price goes up, quantity demand goes up
Which economic rule states that an additional satisfaction people get from consuming one more unit of a product of a lesson that each additional unit they consume?
Law of diminishing marginal utility
The amount of goods and services people can actually buy is there:
Purchasing power
Nonprice factors that influence the amount of demand for a good or service:
Determinants of demand
When a demand curves shift to the right, what does that indicate?
An increase in demand
When a demand curve shifts to the left, what does that indicate?
A decrease in demand
What are the two elements that make up prices of related goods?
Substitute goods and complementary goods
Substitute goods
Products used instead of another product; good used in place of another good; an increase in the price of a good/product causes an increase in demand
Complementary goods
Goods that are commonly used with other goods. An increase in the price of complementary goods causes a decrease in demand a decrease in the price of complementary goods causes an increase in demand example a hotdog and a bun
Many substitutes are available:
Elastic
Gasoline
Inelastic
The cost requires a large portion of the consumers income:
Elastic
Salt
Inelastic
If the product is not a necessity it:
Elastic
Pizza is
Elastic
Popularity declines
Demand decrease
A market size increases
Demand increase
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