Micro Ch 02 | The Law of Demand

Benefits

The satisfaction or advantages gained from a choice or action.

Costs

The value of what is given up to make a choice, including opportunity costs.

Opportunity Cost

The value of the next best alternative foregone when making a decision.

Substitutes

Alternative goods or services that satisfy the same want or need.

Preferences

The intensity of desire or satisfaction expected from a good or service.

Demand

The willingness and ability to pay for a product or service.

Smart Choices

Decisions made when additional benefits outweigh additional opportunity costs or when marginal benefits exceed marginal costs.

Expected Benefits

The anticipated satisfaction or utility from a choice.

Economic Decision-Making

The process of comparing benefits and costs to make choices.

Satisfaction

The fulfillment or pleasure derived from consuming a good or service.

Advertising

Efforts by businesses to influence consumer preferences and demand.

Alternatives

Other options available when making a choice.

Willingness to Pay

The maximum amount a person is willing and able to spend for a good or service.

Affordability

The ability to pay for a good or service without financial strain.

Economic Flexibility

The ability to adapt choices based on substitutes and costs.

Marginal Benefits

The additional benefit gained from consuming one more unit of a good or service.

Circumstances

The specific conditions or context that affect the value of marginal benefits.

Marginal Costs

The additional cost incurred from consuming or producing one more unit of a good or service.

Decreasing Marginal Benefits

The phenomenon where the additional satisfaction from consuming more of the same good diminishes.

Scarcity

The limited availability of a resource, which increases its marginal benefit.

Total Benefit

The overall satisfaction or utility derived from consuming a good or service.

Diamond/Water Paradox

The economic concept explaining why diamonds are expensive and water is cheap based on marginal benefits.

Pricing

The process of determining the monetary value of a good or service, influenced by marginal benefits and costs.

Abundance

A situation where a resource is plentiful, leading to lower marginal benefits.

Utility

The satisfaction or benefit derived from consuming a good or service.

Decision-Making at the Margin

The process of evaluating additional benefits and costs to make choices.

Survival Goods

Essential resources like water, which have high total benefits but low marginal benefits.

Economic Value

The worth of a good or service determined by its marginal benefit and scarcity.

Law of Demand

The principle that as the price of a good increases, the quantity demanded decreases, and vice versa, assuming other factors remain constant.

Willingness and Ability to Pay

A consumer's readiness and financial capacity to purchase a product at a given price.

Quantity Demanded

The specific amount of a product a consumer plans to buy at a given price.

Demand Curve

A graph showing the relationship between the price of a good and the quantity demanded.

Marginal Benefit Curve

A graph showing the maximum price consumers are willing to pay for the last unit of a product.

Consumer Behavior

The study of how consumers make decisions in response to price and other market changes.

Price

The amount of money required to purchase a product or service.

Big Picture

The overall perspective or relationship, such as the entire demand curve rather than a specific point.

Snapshot

A specific point in time or detail, such as quantity demanded at a given price.

Vertical Axis

The axis on a graph that represents price in a demand curve.

Horizontal Axis

The axis on a graph that represents quantity demanded in a demand curve.

Price Changes

Variations in the cost of a product that influence consumer decisions and movement along the demand curve.

Change in Quantity Demanded

Movement along the demand curve caused by a change in the price of the good.

Change in Demand

A shift of the entire demand curve due to changes in factors other than price.

Prices of Related Products

The cost of substitutes or complements that can affect the demand for a good.

Income

The level of consumer earnings that impacts demand for normal and inferior goods.

Expected Future Prices

Consumer expectations about future prices that influence current demand.

Number of Consumers

The total number of buyers in a market, which affects overall demand.

Normal Goods

Goods for which demand increases as consumer income rises.

Inferior Goods

Goods for which demand decreases as consumer income rises.

Complements

Goods that are used together

Market Dynamics

The changes in supply and demand factors that influence market behavior.

Shift in Demand Curve

A change in demand at every price point due to external factors such as income, preferences, or related goods.