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Demand Chapter 4
Flash Cards for my Economics Class. Topic: Demand
13
Economics
12th Grade
08/29/2010

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Term
Demand
Definition
The willingness and ability to buy a specific product/service at various prices.
Term
Quantity Demanded (Qd)
Definition
The amount of a good/service a consumer is willing to buy at a specific price.
Term
The Law of Demand
Definition
Price and Qd have an inverse relationship. As price rises, Qd falls and vice versa.
Term
3 Things that effect Qd
Definition
  1. Income - prices affect purchasing power
  2. Substitute- If a product is available that does the same thing at a cheaper price, people will buy it.
  3. Diminishing Marginal Utility
Term
Diminishing Marginal Utility
Definition
As you use multiple of a product, the satisfaction from each additional product is reduced. When the marginal utility is less than the price, people will stop buying the product.
Term
Demand Schedule
Definition
A table that shows the Qd at various prices.
Term
Demand Curve
Definition
A chart showing the Demand Schedule. ALWAYS slopes downward.
Term
Determinants of Demand
Definition
  1. Tastes / Preferences
  2. Market Size
  3. Income
  4. Prices of related goods (i.e. substitutes and complementary products)
  5. Consumer Expectations
Term
Elasticity of Demand
Definition
The degree to which a change in prices affects the Qd.
Term
Elastic Demand
Definition
Exists when a small change in price creates a large change in Qd.
Term
Inelastic Demand
Definition
When a change in price has little to no effect on the Qd.
Term
Total Revenues Test (Total Receipts Test)
Definition
If revenue increases after an increase in price, a good has inelastic demand.
Term
Determinants of Elasticity
Definition
  1. Existence of Substitutes
  2. The percentage of a person's budget spent on a good
  3. The time allowed to adjust for the price change
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