ecoomics chapter 4

what is the only thing affecting quanitity

price

what is demand

different quantities of goods that consumers are willing and able to buy in different prices

what two behavior patterns overlap to create demand

1. the substituion effect: ex. coke vs pepsi. If the price of one goes up for a product consumers or buyers of that product move to the subst.

2. The income effect: if the price goes down for a product the purchasing power increases for consumers— allowing them to purchase more

3. the law of diminishing marginal decreasing additional satisfaction

what is a demand curve

is a downward sloping showing the inverse relationship between price on the y-axis and qd on the x axis

what are the changes in demand

ceteris paribus “all other things held constant.”. a shift means that all the same prices more a less people are willing and able to purchase that good changes in price dont shift the curve

what are the 5 shifters of demand

1. Tastes and preferences (advertising)

2. number of consumers (population)

3. income - how much you make

4. future expectations (holidays)

price of related goods

Substitues are goods used in place of one another. Ex: if one of pepsi falls; demand/ wants for coke will increase

what is quantity demand

how much product someone is willing to buy

income

as income increases demand increases

as income falls, demand falls ex: new cars, seafood, etc

inferior goods

as income increases, demand falls

as income falls, demand increases ex. (top ramen, used cars, used clothes)

What are the examples of inelastic demand

gasoline

chewing gum

medical care

milk

toilet paper

What are the characteristics of inelastic demand

1. Few substitutes

2. necessities

3. cheap/inexpensive

4. immediate/asap

What is elastic demand

Quantity is sensitive to change in price in other words, the amount people buy is sensitive to price.

What are the examples of elastic demand

Many subs

luxuries

large portion of income

The price of a new laptop decreases, causing consumers to purchase more laptops.

Quantity demanded

The price of tacos decreases, causing consumers to purchase more pizza instead.

Demand

The price of concert tickets increases, causing fewer people to purchase tickets.

Quantity demanded

The price of bicycles remains unchanged, but gasoline prices increase, causing more people to want bicycles.

demand

A popular celebrity starts wearing a certain brand of shoes, causing more consumers to want that brand.

demand

The price of headphones decreases, causing consumers to buy more headphones.

quantity demanded

Consumers' incomes decrease, causing them to purchase fewer brand-name clothing items even though their prices have not changed.

demand

The price of a video game console increases, causing consumers to purchase fewer consoles.

quantity demand

The price of bus transportation increases, causing some consumers to purchase fewer bus rides.

quantity demand

The price of electric vehicles stays the same, but gasoline prices fall, causing fewer consumers to want electric vehicles.

demand

A new fashion trend causes more people to want a particular style of jacket at every price.

demand

• The price of notebooks decreases, causing students to purchase more notebooks.

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quantity demanded

The population of a city increases, causing more people to want apartments at the current rental prices.

demand

• The price of a gym membership stays the same, but a large number of people become interested in fitness, increasing the number of people who want memberships.

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demand

The price of a particular brand of backpack increases, causing students to purchase fewer backpacks from that brand.

quantity demanded

Demand

the desire, willingness and ability to buy a good or service at different prices

Quantity demanded

The specific amount of a good or service consumers are willing and able to buy at a specific price.

Law of Demand

When the price of a good or service increases, the quantity demanded usually decreases; when price decreases, quantity demanded usually increases.

Demand schedule

A table that shows the quantities of a good consumers are willing and able to buy at different prices.

Demand Curve

A graph that shows the relationship between price and quantity demanded.

Market Demand

The total quantity of a good or service that all consumers in a market are willing and able to buy at each price.

Substitution Effect

When the price of a good rises, consumers tend to buy a cheaper substitute instead.

Income effect

When a change in the price of a good changes consumers' purchasing power, affecting how much they buy.

Substitute Goods

Goods that can be used in place of each other, such as Coke and Pepsi.

Complementary Goods

Goods that are commonly used together, such as phones and phone chargers.

Normal Good

A good that people generally buy more of when their income increases.

Inferior Goods

A good that people generally buy less of when their income increases because they switch to higher-quality alternatives.

Change in Quantity demanded

A change in the amount consumers buy because the price of the good itself changes.

Change in Demand

A change in the entire demand for a good caused by something other than its own price.

Demand Shifter

A factor other than price that causes demand to increase or decrease.

Consumer Expectations

What consumers expect to happen in the future that can affect what they buy now.

Consumer Tastes and Preferences

Consumers' likes, dislikes, and preferences that influence what they choose to buy.