Econ (Chapter 2)
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22 Terms
Individual demand
buying decisions of one person
Individual demand curve
a graph that plots the quantity of an item that an individual plans to purchase at each price
Is demand and quantity demand the same
No! quantity demanded is the x-axis, and demand is the slope
Demand is equal to
the marginal benefit
Ceteris paribus
holding everything constant
Law of demand
the tendency for quantity demanded to be higher when the price is lower (and vise versa)
when price goes down
quantity demanded goes up
when price goes up
quantity demanded goes down
rational rule for buyers
how many?→one more? (marginal principal)→mb vs mc→mb to next best alternative (opportunity cost principal)→buy one more if mb>=p; keep buying until price=margnal benefit
Diminishing marginal benefit
each additional item yields less marginal benefit than previous item
market demand curve
a graph plotting the total quantity of an item demanded by the entire market at each price
steps to make a market demand curve
1 survey, 2 for each price, add up total quantity demanded, 3 scale up, 4 plot: quantity demanded and price
characteristics of market demand curve
downwards sloping, as price goes down customers buy more and new customers come in the market
law of demand
as price goes down, quantity demanded goes up
movement along the demand curve
change in quantity demanded (down), change in price (up) (one point to another)
shift in demand
income, preferences (life-altering event, marketing/influencers, social pressure, season/weather), prices of related goods, expectations (about future prices/availability, network and congestion, type and number of buyers (demographic, increase in population, international trade)
normal good
a good where higher income causes an increase in demandi
inferior good
a good which higher income causes a decrease in demandco
complementary goods
go well with each other (increase in price of one causes a shift to the left in another and vise versa)
substitute goods
replace each other (increase in price in one causes a shift to the right for other)
network
good that is more useful because more people use itcon
congestion
a good that is less useful because other people use it