Untitled Flashcards Set

Demand

The desire, ability, and willingness to buy a good or service.

Microeconomics

The study of individual consumers and businesses in an economy.

Demand Schedule

A table showing the quantity of a good consumers are willing to buy at different prices.

Demand Curve

A graphical representation of the demand schedule, showing the inverse relationship between price and quantity demanded.

Law of Demand

As the price of a good increases, the quantity demanded decreases, and vice versa.

Market Demand Curve

A demand curve that shows the total quantity demanded by all consumers at various prices.

Marginal Utility

The additional satisfaction gained from consuming one more unit of a good.

Diminishing Marginal Utility

The principle that as more of a good is consumed, the additional satisfaction gained decreases.

Change in Quantity Demanded

A movement along the demand curve due to a change in price.

Income Effect

When a price drop increases consumers' purchasing power, leading them to buy more.

Substitution Effect

When a price increase causes consumers to replace a good with a cheaper alternative.

Change in Demand

When factors other than price (like income or preferences) shift the entire demand curve.

Consumer Income

The amount of money consumers earn, affecting their purchasing power.

Consumer Tastes

Preferences and trends that influence how much of a good people buy.

Substitutes

Goods that can replace each other (e.g., Coke and Pepsi).

Complements

Goods that are used together (e.g., peanut butter and jelly).

Consumer Expectations

What consumers anticipate about future prices, income, or product availability, affecting demand.

Number of Consumers

The total number of buyers in a market, influencing demand levels.

Elasticity

A measure of how much quantity demanded changes in response to a price change.

Elastic Demand

Demand that changes significantly with a small price change (luxuries, non-essentials).

Inelastic Demand

Demand that changes little with a price change (necessities, few substitutes).

Unit Elastic Demand

A situation where a price change leads to a proportional change in quantity demanded.

Total Expenditures Test

A method to determine elasticity by multiplying price and quantity demanded (if total revenue moves in the opposite direction of price, demand is elastic).