Economics Concepts and Choices Chapter 4

question

demand
answer

The desire, willingness, and ability to buy a good or service
question

law of demand
answer

consumers buy more of a good when its price decreases and less when its price increases
question

demand schedule
answer

a table that shows the relationship between the price of a good and the quantity demanded
question

market demand schedule
answer

a table that lists the quantity of a good all consumers in a market will buy at each different price
question

demand curve
demand curve
answer

A graph of the relationship between the price of a good and the quantity demanded.
question

market demand curve
answer

shows the data found in the market demand schedule
question

law of diminishing marginal utility
answer

the principle that consumers experience diminishing additional satisfaction as they consume more of a good or service during a given period of time
question

income effect
answer

A change in the quantity demanded of a product that results from the change in real income (purchasing power) caused by a change in the product’s price. (buying 2 $5 items instead of 1 $10)
question

substitution effect
answer

when consumers react to an increase in a good’s price by consuming less of that good and more of a substitute good
question

change in quantity demanded
change in quantity demanded
answer

movement along the demand curve that shows a change in the quantity of the product purchased in response to a change in price.
question

change in demand
answer

A change in the quantity demanded of a good or service at every price; a shift of the demand curve to the left or right.
question

normal goods
normal goods
answer

Goods for which demand goes up when income is higher and for which demand goes down when income is lower.
question

inferior goods
inferior goods
answer

Goods for which demand tends to fall when income rises.
question

substitutes
answer

Goods and services that can be used for the same purpose.
question

complements
answer

two goods for which an increase in the price of one leads to a decrease in the demand for the other. I.E. Related goods
question

elasticity of demand
answer

consumers’ responsiveness or sensitivity to changes in price
question

inelastic
answer

Describes demand that is not very sensitive to a change in price
question

total revenue
answer

A company’s income from selling its products

Get instant access to
all materials

Become a Member