Ag Econ Chapter 2

What is individual demand

What you want at each price

what is individual demand curves

a graph that plots the quantity of an item that an individual plans to purchase at each price

What is the law of demand

basically when prices are lower people buy more, prices fall means quantity demanded gets higher

what is quantity demand

the actual number of something somebody wants to buy

what does Ceteris Paribus mean

Holding all other things constant meaning your demand curve is drawn given the current economic conditions

which way does demand curve go

demand curve goes down, demand, down to the ground

What is the same as Demand

Marginal benefit

when do you get economic surplus

when willingness to pay is less than what you actually pay

what illistarates the price at which you are willing to buy each quantity

demand

what is informed by the marginal benefit you associate with that unit

the price you are willing to pay

How does marginal benefit diminsh

each additional item yields smaller marginal benefit that the previous item

what also declines with marginal benefit

willingness to pay

What dollar is usally the most valuable

the first dollar

What is market demand

what the market wants as a whole

what is market demand curve

a graph plotting the total quantity of an item demanded by the entire market, at each price

what is indiviuals demand building blocks for

market demand

If you are not a customer do you effect demand curve

yes when you don’t purchase the item you still add to the curve

what is step one for estimating the market demand

Survey: make a survey of a representative sample, not only way to estimate

What is the second step of estimating market demand

for each price, add up the total quantity demanded by all customers (don’t add up the price but just the units)

What is the third step for estimating market demand

Scale up: make the quantites bigger to represent the whole market

Step 4 of estimating market demand

plot the total quantity demanded by the market at each price yielding the market demand curve

what does movement along the demand curve yield

change in the quantity demanded

what happens to a demand graph when their is an increase in demand

a shift of the demand curve to the right

what does it mean if the demand curve shifts to the left

decrease in demand

6 factors that shift the market demand curve

income, preferences, prices of related goods, expectations, congestion and networking effects, the type and number of buyers

define a normal good

a good for which higher income causes an increase in demand

define inferior goods

a good for which higher income causes a decrease in demand (fast-food, non-organic vegetables)

What are some changes that can influence your preferences

life altering event, meketing/influencing, social pressures, seasons

Complementary good

goods that go well together (buns and hotdogs)

Substitute goods

goods that replace each other (pizza hut and dominos)

what are expectations in economics

predictions about future prices or availability that can influence your demand

what is the networking effect

when a good becomes more useful because other people use it so your demand for it goes up

What is the congestion effect

when a good becomes less valuable because other people use it so your demand goes down

What can increase number of buyers

international trade and increase in the population

What is always on the y axis

P or price

What is always on the x axis

Q or quanitity