Econ Chapter 4

What is law of demand?

price goes up, demand goes down

price goes down, demand goes up

Price and demand move in _______ directions.

opposite

What is quantity demand?

the amount of a good that consumers are willing and able to purchase at a particular price over a given period of time

Quantity demand represents ________ on a graph and it happens due to a change in _______.

movement and price

What are two factors that affect consumer buying?

substitution effect and income effect

What is substitution effect?

when an increase in the price of a good causes a consumer to switch away from that good and toward other goods that do not experience a price increase

What is an example of a substitution effect?

price of coke doubles so you buy pepsi

What is income effect?

the change in consumption that occurs when a price increase causes consumers to feel poorer or when a price decrease cases them to feel richer or an actual change in their income

What is demand schedule?

a table that relates the quantity demanded of a particular good to its price

what is a demand curve?

a graphical representation of the demand schedule for a good showing the quantity demanded at each price

What is market demand curve?

a graphical representation of the quantity of a good demanded by ALL consumers in the market at each price

_______ of the demand curve represents a change in the amount people are willing and able to buy at every price (no change in price)

shift

Increase in demand will shift the curve to the _________

right

Decrease in demand will shift the curve to the _____

left

What is change in quantity demanded?

a movement along the demand curve caused by a change in price

what is change in demand?

a shift of the demand curve due to the quantity demanded not a change in price

what is movement along a demand curve?

caused due to change in price

what are events that can influence a shift in demand?

taste, income, price related goods, expectations, number of buyers

What is a normal good?

an increase in demand when income rises or a decrease in demand when income decreases describes a normal good

what is a inferior good?

an increase in demand when income decreases or a decrease in demand when income increases

what is an example of a normal good?

buying combo meal at a fast food place

what is an example of an inferior good?

buying off the $1 menu at a fast food placeand

An inferior good is just ____ expensive

less

What are substitutes?

when an increase in the price of one of the goods leads to an increase in the demand for the other goode

what is an example of substitutes?

price of coke goes up, so you buy pepsi

what are complements?

when two goods are consumed together an an increase in the price of one of the goods leads to a decrease in the demand for the other

what is an example of a complement

increase in the price of syrup leads to a decrease in the demand for pancakes

Give an example of how do expectations influence demand?

a storm, everybody fills up with gas, goes to the store to buy food

the more buyers the _______ _____ _______

higher the demand

what is elasticity of demand?

a measure of how strongly consumers respond to a change in the price of a good

what is elastic?

when consumers respond to a change in price with a relatively large change in the quantity demanded

what are examples of items that would be elastic?

luxuries

what is inelastic?

when consumers respond to a change in price with a relatively small change in demand

what is an example of something that would be inelastic?

necessities