Economics: Demand, Shifts of the Demand Curve, and Elasticity

Comprehensive vocabulary flashcards covering the core economic concepts of consumer demand, the law of demand, curve shifts and determinants, and elasticity of demand.

Quantity Demanded

The amount of a good or service that consumers are willing and able to purchase at a particular price over a given period of time.

Law of Demand

The economic principle stating the tendency for the price and the quantity demanded to move in opposite directions; there is an inverse relationship between the price of a good and the quantity demanded, all else held constant.

Substitution Effect

The tendency for consumers to switch away from a good whose price has risen and toward other goods that have become relatively less expensive, or to switch toward a good whose price has decreased.

Income Effect

The change in consumption that occurs when a price increase diminishes the purchasing power of consumers' income (causing them to feel poorer) or when a price decrease enhances purchasing power (causing them to feel richer).

Ceteris Paribus

A Latin term meaning "all else equal," used by economists to indicate that all other variables or influences that might affect a relationship are held constant.

Demand Schedule

A table that relates the quantity demanded of a particular good or service to its price.

Demand Curve

A graphical representation of the demand schedule for a good or service, showing the quantity demanded at each price and sloping downward to the right.

Market Demand Curve

A graphical representation of how the total quantity demanded by all consumers in the market varies with price, derived by summing each individual consumer's quantity demanded at each price.

Change in Quantity Demanded

A movement along an existing demand curve that is caused solely by a change in the price of the good itself.

Change in Demand

A shift of the entire demand curve (either to the right or to the left) caused by a change in any influence on consumer buying behavior other than the price of the good.

Normal Good

A good for which consumer demand increases when income rises and decreases when income falls.

Inferior Good

A good for which consumer demand decreases when income rises and increases when income falls.

Substitutes

Two goods that can take the place of each other, such that an increase in the price of one good leads to an increase in the demand for the other good.

Complements

Two goods that are typically consumed together, such that an increase in the price of one good leads to a decrease in the demand for the other good.

Conspicuous Consumption

A phrase coined by economist Thorstein Veblen to convey the idea that wealthy people purchase certain visible luxury goods as a signal of high social standing and wealth.

Consumer Expectations

A demand shifter referring to consumer beliefs about future prices, income, or product shortages that influence how much of a good they demand in the present.

Elasticity of Demand

A measure of how strongly consumers respond to a change in the price of a good, calculated as the percentage change in the quantity demanded divided by the percentage change in price.

Elastic Demand

A market condition where consumers respond to a change in price with a relatively large change in quantity demanded; occurs when the elasticity value is greater than $1.0$.

Inelastic Demand

A market condition where consumers respond to a change in price with a relatively small change in quantity demanded; occurs when the elasticity value is less than $1.0$.

Unit-Elastic Demand

A condition where consumers respond to a price change by altering the quantity demanded by the exact same percentage, resulting in an elasticity value equal to $1.0$.

Perfectly Elastic Demand

An extreme case of price responsiveness where any increase in the price of a good causes quantity demanded to fall to zero, represented graphically by a horizontal demand curve.

Perfectly Inelastic Demand

An extreme case where quantity demanded shows no response to price changes, represented graphically by a vertical demand curve.

Total Revenue

All the money consumers spend on a good and firms receive from selling it during a specific period of time, calculated as the price of the good multiplied by the quantity sold ($\text{Price} \times \text{Quantity}$).

TRIPES

A mnemonic used to remember the five non-price determinants that shift a demand curve: Tastes and preferences, Related goods (substitutes and complements), Income, Population (number of buyers), and Expectations.

PINTS

A mnemonic representing five key factors influencing the price elasticity of demand: Paying the bill (who pays), Income share spent, Necessities versus luxuries, Time horizon, and Substitutes available.