chapter 2 Econ (demand and consumer choice)

what is a market demand

what the market wants

what does the market demand summarize?

relationships between price, quantity and demand

what does demand look at

looks at buying decisions rather than selling decisions

is the quanity demand the same as demand

no not the same

what is your quanity demand

Your desire to buy something

what is an individual curve

shows the quantity of an item that someone plans to buy at each price

what does the individual demand curve summarize

buying plans and how your plans vary with price

what is another word for individual demand curve

certeris paribus

what does ceteris paribus do

holds things constant

what is the law of demand

when the price of a good increases the quantity demand decreases

what is the rational rule

get more of an item if the marginal benefit of "one more" is greater than or equal to the price

what happens when you follow the rational rule

each purchase will boost your total benefit more than it boots your total cost

what can also be your demand curve

demand curve is also your marginal benefit curve

what does ' demand illustrate

the price that you are willing to buy each quantity

are the demand curve and marginal benefit the same?

yes

How do you diminish the marginal benefit?

a person consumes more of a good and the extra satisfaction gained from each good decreases (ex getting full from eating)

what direction is the market demand curve slopping

downward

what does a change in price cause

movement from one point to another on the demand curve

what does a change in quality demand cause

movement along fixed demand curve

what does a shift in demand curve cause

moment of the demand curve itself

what direction does an increase in demand curve move

to the right

what direction does an decrease in demand curve move

to the left

what does the interdependence principle state?

that everything is connected

what are the 6 factors that shift demand market curve

1. income

2. preferences

3. price

4. expectations

5. congestion and network effects

6. number of and type of buyers

will a change in price shift the demand curve?

no

what is the law of large numbers

random movements of a large number of items offset another

what does a change in price cause?

movement along the curve only

what is a normal good

higher income that increases demand (rich ppl)

what is an inferior good?

something people buy less of when their income goes up ( ex instant noodles they might invest in fresh pasta)

what is a complementary good

a product used together with another good so when you buy more of one you buy more of the other too

what happens when ONE complimentary goods price rises

demand for the other good falls

what is a substitute good

product that replaces another because it serves the same purpose

what happens when the price goes up on ONE substitute good

people switch to the substitute if price is better

what is Network effect

when there is a useful product and a lot of users use it the demand rises (ex social media)

what is the congestion effect?

when there is a lot of users but the product is useless the demand falls (ex busy routes on dougall)