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Ch 4 Demand
Chapter 4 Demand
| Term | Definition |
|---|---|
| demand | combination of quantities that someone would be willing and able to buy over a range of possible prices at a given moment |
| microeconomics | branch of economic theory that deals with behavior and decision making by small units such as individuals and firms |
| demand schedule | listing showing the quantity demanded at all possible prices that might prevail in the market at a given time |
| incentive | something that motivates |
| demand curve | graph showing the quantity demanded at each and every possible price that might prevail in the market |
| Law of Demand | rule stating that more will be demanded at lower prices and less at higher prices; an inverse relationship between price and quantity demanded |
| market demand curve | demand curve that shows the quantities demanded by everyone who is willing ans able to purchase a product at all possible prices at one moment in time |
| marginal utility | additional satisfaction or usefulness obtained from acquiring or consuming one more unit of a product |
| diminishing marginal utility | decrease in additional satisfaction or usefulness as additional units of a product are acquired |
| change in quantity demanded | movement along the demand curve showing that a different quantity is purchased in response to a change in price |
| income effect | that portion of a change in quantity demanded caused by a change in a consumer's income when the price of a product changes |
| substitution effect | the portion of a change in quantity demanded that is due to a change in the relative price of the good |
| change in demand | different amounts of a product are demanded at every price, cause the demand curve to shift to the left or to the right |
| substitutes | competing products that can be used in place of one another; products related in such a way that an increase in the price of one increases the demand of the other |
| completments | products that increase the use of other products; products related in such a way that an increase in the price of one reduces the demand for both |
| elasticity | a measure of responsiveness that tells us how a dependent variable, such as quantity demanded or quantity supplied, responds to a change in an independent variable such as price |
| demand elasticity | the extent to which a change in price causes a change in the quantity demanded; demand elasticity has three cases; elastic, inelastic, or unit elastic |
| elastic | type of elasticity in which a change in the independent variable (usually price) results in a larger change in the dependent variable (usually quantity demanded or supplied) |
| inelastic | case of demand elasticity where the percentage change in the independent variable (usually price) causes a less than proportionate change in the dependent variable (usually quantity demanded or supplied) |
| unit elastic | elasticity where a change in the independent variable (usually price) generates a proportional change of the dependent variable (quantity demanded or supplied) |
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