ts pmo sybau

econ quiz notes

Demand

The desire to own a product AND the willingness and ability to buy it.

Price of the product

the amount of money required to purchase a product

Quantity

the amount of a product that is offered for sale at a given time.

Demand curve

A graph showing the quantity of a product demanded at each price. (individual)

Incentive

A motivating influence that causes a person to act.

Law of demand

The principle that quantity demanded varies inversely with price.

Market demand curve

Shows the quantities of a product demanded by all consumers at all possible prices.

Marginal Utility

The extra satisfaction or additional usefulness gained from acquiring multiple units of a product.

Diminishing marginal utility

The principle that the extra satisfaction from using additional products declines as more is consumed.

Income effect

The change in quantity demanded due to a change in price making consumers feel richer or poorer.

Change in price

the only thing that can change quantity demanded

Substitution effect

consumers substitute an alternative product for one that has become more expensive

Demand Elasticity

The extent to which a change in price causes a change in quantity demanded.

Elastic Demand

When a change in price causes a relatively larger change in quantity demanded.

Inelastic Demand

When a change in price causes a relatively smaller change in quantity demanded.

Unit Elastic Demand

When a change in price causes a proportional change in quantity demanded.