Microeconomics: Demand and the Law of Demand

A comprehensive set of vocabulary flashcards covering key definitions, laws, equations, economists' perspectives, assumptions, and concepts related to microeconomic demand and market demand.

Demand

The want, need or desire for a product backed by the money to purchase, comprising both the desire to purchase and the ability to purchase.

Demand Equation

$$\text{Demand} = \text{Desire to Purchase} + \text{Ability to Purchase}$$

Demand (Prof. John B. Taylor)

A relationship between price and quantity demanded, showing how much of a particular good people are willing to buy at a given price, all else being equal.

The Law of Demand

The inverse relationship between the price and the quantity demanded of a good or service during some period of time, keeping other factors constant.

Law of Demand (Prof. Dr. Alfred Marshall)

Other things being equal, the amount demanded increases with a fall in price and diminishes with a rise in price.

Demand Function

Symbolically denoted as $Q_d = f(P)$, showing that quantity demanded is a decreasing function of price.

Demand Schedule

A table showing that as the price of a commodity increases, its demand decreases.

Demand Curve

A graphical representation of the demand schedule with quantity demanded on the x-axis and price per unit on the y-axis, exhibiting a negative slope from left to right.

Price Effect

The phenomenon where a fall in a commodity's price leads existing and new consumers to increase demand, while a rise in price leads consumers to reduce or stop consumption.

Income Effect

The change in consumption resulting from a change in a consumer's purchasing power or real income caused by a change in a commodity's price.

Substitution Effect

The tendency of consumers to switch to a commodity when its price falls relative to constant-priced substitute goods, or away from it when its price rises.

Homogeneous Commodity Assumption

An assumption of the Law of Demand that all units of a product must be identical in quality and quantity to ensure equal utility across successive units.

Market Demand

The summation of all individual consumers' demands for a homogeneous good in the market.

Market Demand (Prof. Benham)

The amount of anything at a given price that will be bought per unit of time at that price by all the individuals.

Market Demand Schedule

A table showing the sum of the different quantities of a commodity demanded by multiple individuals at various prices.

Market Demand Curve

The horizontal summation of all individual demand curves, which appears flatter compared to individual demand curves.

Market Demand Curve (Prof. C.R. McConnell and S.L. Brue)

The curve found graphically by summing horizontally the individual demand curves of all consumers in the market.

Change in Quantity Demanded

A movement from one point to another along a fixed demand curve, caused solely by a change in the price of the product.

Extension in Demand

An increase in quantity demanded caused by a decline in the price of the product.

Contraction in Demand

A decrease in quantity demanded caused by an increase in the price of the product.

Change in Quantity Demanded (Prof. David N. Hyman)

A change in the amount of a good buyers are willing and able to buy in response to a change in the price of the good.