Economics Vocab 3.1-3.3

Demand

The desire to own something and the ability to pay for it

Law of Demand

when a good price is lower consumers will buy more of it

Substitution Effect

when a consumer reacts to a rise in the price of one good by consuming less of that good and more of a substitute good

Income Effect

When you can no longer afford to buy the same combination of goods and you must cut back your purchases of some goods

Demand Schedule

a table that lists the quantity of a good that a person will purchase at various prices in a market

Market Demand Schedule

the quantities demanded at various prices by all consumers in the market

Demand Curve

a graphic representation of a demand schedule

Ceteris Paribus

The Latin phrase for all other things held constant

Normal Good

Goods that consumers demand more of when their incomes increase

Inferior Good

goods that you would buy in smaller quantities or not at all if your income were to rise and you could afford something better

Demographics

the statistical characteristics of populations such as age race gender occupation and income level

Complements

two goods that are bought and used together

Substitutes

Goods that are used in place of one other

Non

Price Determinants

Elasticity of Demand

Measures how drastically buyers will cut back or increase their demand for a good when the price Rises or Falls respectively

Inelastic

if you buy the same amount or just a little less of a good after a large price increase your demand is inelastic

Elastic

if you buy much less of a good after a small price increase your demand is elastic

Unitary Elastic

if the elasticity is greater than one demand is elastic. If elasticity is exactly equal to one, we describe demand as unitary elastic

Total Revenue

the amount of money the company receives by selling its goods