economics vocabulary chapter 3 section 1 demand quantity demanded law of demand purchasing power...

Economics Vocabulary Chapter 3 Section 1

Demand

Quantity Demanded

Law of demand

Purchasing power

Income effect

Substitution effect

Diminishing marginal utility

Demand schedule

Demand curve

Economics Vocabulary Chapter 3 Section 1

Demand – the amount of a good or service that a consumer is willing and able to buy at various possible prices during a given time periodQuantity Demanded – the amount a good or service that a consumer is willing and able to buy at each particular price during a given time period

Economics Vocabulary Chapter 3 Section 1

Law of demand – relationship between price and the quantity demanded • increase in price causes a

decrease in demand• decrease in price causes an

increase in demand

Economics Vocabulary Chapter 3Section 1

Income effect – any increase or decrease in consumer’s purchasing power tends to decrease his or her demand

Substitution effect – describes the tendency of consumers to substitute a similar, lower-priced product for another product that is relatively more expensive

Diminishing marginal utility – utility of each unit consumed diminishes, or lessons with each additional unit

Economics Vocabulary Chapter 3Section 1

Purchasing power – the amount of money or income that people have available to spend on goods and services

Demand schedule – the relationship between the price of a good or service and the quantity that consumers demand• Lists the quantity of goods that consumers are

willing and able to buy at a series of possible prices

Demand curve – the relationship between the price of a product and the quantity demanded (on a graph)

Economics Vocabulary Chapter 3 Section 2

Determinants of demand

Substitute goods

Complementary goods

Economics Vocabulary Chapter 3Section 2

Demand curve – shows the quantity of a good or service demanded at each price during a specific period of time

determinants of demand –

Substitute goods

Complementary goods

Economics Vocabulary Chapter 3Section 2

Group of factors that shifts demand

• Consumer tastes and preferences

• Market size• Income• prices of related goods• Consumer expectations

Economics Vocabulary Chapter 3Section 2

Shifts in Demand• Increase in demand

price stays the same

Quantity demanded increases

(compared to the original quantity)

• Decrease in demandprice stays the same

Quantity demanded decreases

(compared to the original quantity)

Economics Vocabulary Chapter 3Section 2

Substitute goods – good that can be used to replace the purchase of similar goods when prices rise

Complementary goods –

Goods that are commonly used with other goods

Economics Vocabulary Chapter 3 Section 2

Elasticity of Demand- the degrees to which changes in a good’s price affects the quantity demanded by consumers.

2 types• Elastic demand• Inelastic demand

Economics Vocabulary Chapter 3 Section 2

Elastic demand• The product is not a necessity• There are readily available

substitutes• The product’s cost represents

a large portion of consumer’s income

Economics Vocabulary Chapter 3 Section 2

Inelastic demand• The product is a necessity• There are few or no readily

available substitutes• The product’s cost represents

a small portion of consumer’s income

Economics Vocabulary Chapter 3Section 3

3 characteristics that determines if a product is elastic or inelastic

• Is the product a necessity?• Does the product have a number of available

substitutes?• Does the product’s cost represent a small or

large portion of consumers’ income

Economics Vocabulary Chapter 3Section 3

Total-revenue – also known as total receipts – refers to the total income that a business receives from selling its products. Can businesses or manufacturers change the demand elasticity of their product to increase revenue? HOW?

Economics Chapter 3-3Section 2

Can a product be both elastic and inelastic at the same time?

Give an example for yes or no