Chapter 3: Demand and the Demand Curve

Vocabulary flashcards covering key concepts around demand, the demand curve, and consumer surplus from the lecture notes.

Demand

The relationship between a good's price and the quantity buyers are willing to purchase; not a single number, but a function linking price to quantity demanded.

Quantity demanded

The amount of a good that buyers are willing to buy at a given price.

Demand curve

A graph of the price–quantity demanded relationship; typically downward sloping; price on the vertical axis and quantity demanded on the horizontal axis.

Law of demand

When price rises, quantity demanded falls, holding all else constant (ceteris paribus).

Heteris paribus

A Latin phrase meaning 'all else held equal.'

Movement along the demand curve

A change in quantity demanded caused by a change in price, with demand held constant, so you move along the same demand curve.

Shift of the demand curve

A change in demand due to factors other than price, causing the entire demand curve to move to the right (increase) or left (decrease).

Increase in demand

A rightward shift of the demand curve, meaning higher quantity demanded at every price.

Decrease in demand

A leftward shift of the demand curve, meaning lower quantity demanded at every price.

Consumer surplus

The net benefit to buyers from a purchase; the sum of (willingness to pay minus price) across buyers; graphically the area between the demand curve and the price line.

Willingness to pay

The maximum price a buyer is willing to pay for a unit of the good.

Price axis convention

Economists plot price on the vertical axis and quantity demanded on the horizontal axis when graphing the demand curve.

Vertical reading of the demand curve

Reading the demand curve by fixing a price on the vertical axis and reading the corresponding quantity demanded on the horizontal axis.

Horizontal reading of the demand curve

Reading the demand curve by fixing a quantity demanded on the horizontal axis and reading the corresponding price on the vertical axis.

Demand vs quantity demanded

Demand is the overall relationship; quantity demanded is a single point on that curve at a given price.

Price change vs demand change

A price change causes movement along the demand curve (quantity demanded changes); a non-price factor causes the entire demand curve to shift (demand changes).