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PIG & ECON Demand
17 questions on Demand
| Term | Definition |
|---|---|
| Relative Price | price of a good in terms of another good Relative price is more direct measure of opportunity cost |
| Nominal Price | price expressed in terms of the monetary unit |
| Demand | A relationship between price and quantity demanded in a given time period. |
| Demand Schedule | The price and quantity demanded on a T-Chart. |
| Demand Curve | A graph that shows individual consumer demand curves. |
| The Law of Demand | An inverse relationship exists between the price of a good and the quantity demanded in a given time period. 1. Reasons 2. Substitution effect define 3. Income effect define |
| 5 Determinants of Demand | 1. tastes and preferences and fads 2. Prices of related goods and services 3. Income 4. Number of consumers 5. Expectations of future prices and income. |
| Complementary Goods | an increase in the price of one results in a (decrease) in the demand for the other. |
| Substitute Goods | An increase in the price of one results in an (increase) in the demand for the other. |
| Normal Goods | A normal good if an increase in income results in an increase in the demand for the good. |
| Inferior Goods | A good is an inferior good if an increase in income results in a reduction in the demand for the good. |
| Income and Demand: Normal Goods | A good is a normal good if an increase in income results in an increase in the demand for the good |
| Expectations | A higher expected future price will increase current demand a lower expected future price will decrease current demand A higher expected future will increase the demand for all normal goods a power expected future income will reduce the demand for all |
| International Effects | Exchange rate-the rate at which one currency is exchanged for another Currency appreciation-an increase in the value of a currency relative to the other currencies Currency depreciation-an I decrease in the value of currency relate to other currencies |
| Barter Vs. Monetary economy | Barter-goods are traded directly for other goods Problems: Requires double coincide of wants Large number of trading ratios: N(N-1)/2 (high information costs) Monetary economy has lower transaction and information costs |
| Prices of Related Goods | Substitute goods-an increase in the price of one results im an increase in the demand for the other Complementary goods-an increase in the price of one results in a decrease in the demand for the other. |
| Demand and the # of buyers | An increase in the number of buyers results in an increase in the demand |
Created by:
afrisch
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