Unit 2 Consumers, Households, and Demand in a Market Economy

Demand curve

a graph showing the quantity of demand at each price that might be used in the market at a given time.

Shifts

Change in demand

Goods

(groceries, gas, hair cut, etc.)

Causes for change of demand

change in quantity demanded, or TRIBE (tastes related income buyers expectations)

Complements

products which are bought and used together.

elastic

when a change in price causes a large change in demand.

inelastic

when a change in price causes a small change in demand.

Unit Elastic

proportional change in price and quantity

Substitutes

a product or service that consumers see as essentially the same or similar-enough to another product.

Total expenditures

The sum of the price paid for one or more products or services multiplied by the amount of each item purchased.

Be able to interpret graphs

Demand Curve and Individual Demand Schedule

Graph

one method that economists use to understand the sometimes complicated elements of demand.

Real capita GDP

an economy's production per person. Often viewed as an indicator of the population's general welfare and standard of living and is a good indicator of a country's economic development when compared to other economies.

GDP

(Gross domestic product) an economic snapshot of a country, used to estimate the size of an economy and its growth rate.

Standard of living

the level of wealth, comfort, material goods, and necessities available to a certain socioeconomic class or geographic area.

Human capital

the economic value of a worker's experience and skills. Human capital includes assets like education, training, intelligence, skills, health, and other things employers value such as loyalty and punctuality.

Relationship between price and quantity

Law of Demand

Determinants of Elasticity

• Is the product a luxury or a necessity?

• What is the time horizon? Do you need the product immediately?

• Does the purchase comprise a large or small part of your income?

• Are there close substitutes? 

• How big is the market?

Diminishing marginal utility

the extra usefulness/satisfaction one gets from getting or using one more unit of a product.