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Cards In This Set
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What is Demand?
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Demand is the amount of good or services a consumer is WILLING and ABLE to buy at VARIOUS prices during a given time period
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What is QUANTITY Demanded?
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The amount of a good or service that a consumer is willing and able to buy at each PARTICULAR price during a given time period
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What does the law of demand infer?
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An increase in the price of a good will decrease the quantity demanded. (inverse relationship) when P goes up, QD goes down.
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What is diminishing marginal utility?
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The natural decrease in the utility of a good or service as more of it is consumed.
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What are the determinants of demand? (5)
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1) Consumer taste and preferences
2) Market size
3) Income
4) Prices of related goods
5) Consumer expectations
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What are three components of Market Size?
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1) Business decisions
2) Government decisions
3) New technology
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What is ELASTIC demand?
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Small change in price will cause relatively large change in Quantity demanded
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Three things that cause ELASTIC demand...
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1) Product is not a necessity
2) Has many readily available substitutes
3) Product's cost is large portion of income.
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What does an ELASTIC curve look like almost?
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Horizontal
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Disposable Income vs. Purchasing Power
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Disposable income is money left after all taxes are taken out, while purchasing power is the ability to purchase goods and services.
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