Combination of desire, ability, and willingness to buy a product
Microeconomics examines how economic decisions and behaviors affect the supply and
demand for goods and services, which in turn determines prices, which then dictate the supply
and demand of goods and services
Listing showing the quantity demanded at all possible prices that might prevail in the market at a
given time
Graph showing the quantity demanded at each and every possible price that might prevail in the
market at a given time
A rule stating that more will be demanded at lower prices and less at higher prices; inverse
relationship between price and quantity demanded The Law of Demand states that more of a
product will be purchased at low prices than at high prices
Demand curve that shows the quantities demanded by everyone who is interest in purchasing a
product
The additional satisfaction a consumer gains from consuming one more unit of a good or
service. Marginal utility is the extra usefulness or satisfaction a person gets from
acquiring or using one or more unit of a product.
Decreasing satisfaction or usefulness as additional units of a product are acquired
Change in quantity demanded is a movement along the demand curve showing that a different
quantity is purchased in response to a change in price
change in consumer consumption as a result of a change in spending ability
The substitution effect is that portion of a change in quantity demanded due to a change in the
relative price of the product
Consumers demand different amounts at every price, causing the demand curve to shift to the
left or the right.
Substitutes are 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 for the other.
Products that increase the value of other products; products related in such a way that an
increase in the price of one reduces the demand for both.
Income effect is a change in the quantity demanded due to a change in price that alters a
consumer’s real income.
Complimentary goods are goods that go together. An example of complimentary goods
are peanut butter and jelly
Examples of normal goods would include name brand cereal or a name brand soda.
Normal goods are goods that a consumer buys on a regular basis
A measure of responsiveness that tells us how a dependent variable responds to a change in
an independent variable. For instance, how consumers react to a change in the price of a
product
Measure of responsiveness relating change in quantity demanded (dependent variable) to a
change in price (independent variable). For instance, will the change in price cause a larger,
smaller, or proportional change in quantity demanded.EX snack foods
Elastic::Type of elasticity where the percentage change in the independent variable (usually
price) causes a more than proportionate change in the dependent variable (usually quantity
demanded or supplied).
Inelastic::Type of 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 is elasticity where a change in the independent variable (usually price) generates a
proportional change of the dependent variable (quantity demanded or supplied)
Inelastic demand :Given changes in price causes a smaller change in quantity
demanded.
If a product has a unit elastic demand and the price of the product is increased by 10% what do
we know about the quantity demanded?Quantity demanded will decrease by 10%
If a business decreases the price of its product and the product is elastic what happens to the
total revenue of the business? The total revenue increases
If a business increases the price of their product by 10% and the product is inelastic, what will
happen to the business revenue? It will increase
Define elasticity Measure of how consumers react to price change.
Elasticity is the percentage change in quantity divided by the percentage change in _______.
a. incomes
b.price
c. preferences
d. Demand
Will a product tend to be elastic or inelastic if the purchase of a product can
be delayed? It will be elastic
If a product is elastic what does this mean? That a given change in price
causes a similar change in quantity demanded.
Diminishing marginal utility is the decrease in satisfaction or usefulness
received from each additional unit of a product.
Marginal utility is the extra usefulness or satisfaction a person gets
from acquiring or using one or more unit of a product.
Complimentary goods are goods that go together. An example of
complimentary goods are peanut butter and jelly
Advertising has been found to change consumer’s tastes and
preferences
Ceteris paribus means all other things constant