MicroEconomics - Demand and the Law of Demand

law of demand

a higher price leads to a lower quantity demanded; a lower price leads to a higher quantity demanded

demand

the amount of some good or service consumers are willing and able to purchase at each price; based on needs and wants; the relationship between a range of prices and the quantities demanded at those prices; refers to the curve

price

what a buyer pays for a unit of the specific good or service

quantity demanded

the total number of units purchased at a price; refers to a specific point on the curve

demand schedule

a table that shows the quantity demanded at each price

demand curve

a graph that shows the quantity demanded at each price

ceteris paribus assumption

demand curves relate the prices and quantities demanded assuming no other factors change

normal good

a good for which demand will increase when buyers’ incomes increase

inferior good

a good for which demand will decrease when buyers’ incomes increase

substitute goods

goods that can replace each other; when the price of a good increases, the demand for this will increase

complement goods

goods that are consumed together; when the price of a good increases the demand for this will decrease