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Law of Demand
there is an inverse relationship between price levels and quantity demanded (when the price of a product increases, the demand for the same product will fall)
Demand
the amount of a particular good or service consumers are willing and able to buy at different prices and times
Buying Power
change in consumption patterns due to the change in purchasing power (when prices do down, people have more buying power. when prices increase, people have less buying power)
Diminishing Marginal Utility
as you continue to consume a given product, you will get less additional utility (satisfaction) from each unit you consume
Diminishing Personal Value
when your buying power weakens, you will focus on buying things that are more important and necessary in life
Price Effect
the effect of price on a consumer's demand (ex. a theatre raises tickets from $10 to $12 dollars, resulting in a 5% decrease in ticket sales)
Substitute Goods
good or service that replaces another because their price is lower than the other good or service
Complimentary Goods
a good or service that goes alone with another good or service (buying both a printer and ink cartridge)
Change in Demand
a good or service price stays the same, but the consumers' demand can change (curve moves down and left: less demand; curve moves up and right: increased demand)
Elasticity of Demand
a measure of how consumers react to a change in price
Price Elasticity Demand Formula
E = ((Q2-Q1)/(Q2+Q1)/2)/((P2-P1)/(P2+P1)/2)
Note
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