Economics - Ch. 4 Vocab

demand

combination of desire, ability, and willingness to buy a product

microeconomics

branch of economic theory that deals with behavior and decision making by small units such as individuals and firms

demand schedule

listing showing the quantity demanded at all possible prices that might prevail in the market at a given time

demand curve

graph showing the quantity demanded at each and every possible price that might prevail in the market at a given time

Law of Demand

rule stating that more will be demanded at lower prices and less at higher prices; inverse relationship between price and quantity demanded

market demand curve

demand curve that shows the quantities demanded by everyone who is interested in purchasing a product

marginal utility

satisfaction or usefulness obtained from acquiring one more unit of a product

diminishing marginal utility

decreasing satisfaction or usefulness as additional units of a product are acquired

change in quantity demanded

movement along the demand curve showing that a different quantity is purchased in response to a change in price

income effect

the portion of a change in quantity demanded caused by a change in a consumer’s real income when the price of a product changes

substitution effect

the portion of change in quantity demanded due to a change in the relative price of the product

change in demand

consumers demand different amounts at every price, causing the demand curve to shift to the left or the right

substitutes

competing products that can be used in place of one another; products related in such a way that an increase in the price of one increases the demand for the other

complements

products that increase the value of other products; products related in such a way that an increase in the price of one reduces the demand for both

elasticity

a measure of responsiveness that tells us how a dependent variable such as quantity responds to a change in an independent variable such as price

demand elasticity

measure of responsiveness relating change in quantity demanded (dependent variable) to a change in price (independent variable)

elastic

type of elasticity where the percentage change in the independent variable (usually price) causes a more than proportionate change in the dependent variable (usually quantity demanded or supplied)

inelastic

type of elasticity where the percentage change in the independent variable (usually price) causes a less than proportionate change in the dependent variable (usually quantity demanded or supplied)

unit elastic

elasticity where a change in the independent variable (usually price) generates a proportional change of the dependent variable (quantity demanded or supplied)