Economics - Ch. 4 Vocab

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19 Terms

1

demand

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

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2

microeconomics

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

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3

demand schedule

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

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4

demand curve

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

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5

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

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6

market demand curve

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

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7

marginal utility

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

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8

diminishing marginal utility

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

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9

change in quantity demanded

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

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10

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

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11

substitution effect

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

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12

change in demand

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

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13

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

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14

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

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15

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

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16

demand elasticity

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

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17

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)

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18

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)

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19

unit elastic

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

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