Econ 110A Week Two: Consumers and Demand

These flashcards cover key concepts related to individual and market demand, consumer choices, and the principles affecting demand.

Individual Demand Curve

A graphical representation that shows the quantity of an item an individual would purchase at various prices.

Law of Demand

The principle that states quantity demanded increases as price decreases, implying a downward slope of the demand curve.

Marginal Principle

The approach of breaking down decisions into smaller, marginal choices to determine how much to buy.

Cost-Benefit Principle

A decision-making framework that suggests buying an additional unit (e.g., gas) if its marginal benefit exceeds its marginal cost.

Opportunity Cost Principle

A principle that encourages evaluating the next best alternative when making a choice.

Rational Rule

The guideline that suggests consumers should continue to purchase additional units of a good until the marginal benefit equals the marginal cost.

Market Demand Curve

A curve that represents the total quantity of a good demanded by all consumers in the market at different prices.

Shifts in Demand

Changes in consumer preferences or market conditions that lead to a new demand curve, different from movements along the curve due to price changes.

Substitute Goods

Items that can replace each other; an increase in the price of one leads to an increase in demand for the other.

Complementary Goods

Goods that are consumed together; an increase in the price of one leads to a decrease in demand for the other.

Inferior Goods

Goods for which demand decreases as consumer income rises.

Normal Goods

Goods for which demand increases as consumer income rises.

Network Effects

The phenomenon where a good becomes more valuable as more people use it, leading to a rightward shift in the demand curve.

Congestion Effects

The decrease in demand for a good as more people use it, leading to a leftward shift in the demand curve.

Six Factors Changing Demand

Income, preferences, prices of related goods, expectations, network effects, and changes in the number or composition of buyers.