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Economics 3
| Term | Definition |
|---|---|
| demand | the desire to own something and the ability to pay for it |
| law of demand | consumers buy more of a good when its price decreases and less when its price increases |
| income effects | change in consumption resulting from a change in income |
| no changes other than price that could affect the consumer's decision | demand curves are accurate only as long as there are |
| normal goods | good that consumers demand more of when their income increases |
| inferior goods | good that consumers demand less of when their income increases |
| used car, generic brands | example of inferior goods |
| your demand will rise | if you expect prices to rise |
| complements | two goods that are bought and used together |
| substitutes | goods used in place of one another |
| elasticity of demand | measure of how consumers react to price changes |
| inelastic | describes demand that is not very sensitive to change in price |
| elastic | describes demand that is very sensitive to change in price |
| bottled water or computers | example of elastic goods |
| but where the price began is the deciding factor | percentage increases can be the same |
| substitutes, importance, N vs. L, and time | 4 factors of elasticity of demand |
| you are more likely to buy it if the price increases | if there are few substitutes for a good |
| total revenue | total amount of money a firm receives by selling goods or service |
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pace_sauce
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