The quantity of a good or service that consumers choose to buy at any possible price in a given period.
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Diminishing marginal utility
Describes the situation where an individual gains less additional utility from consuming a product, the more of its consumed.
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Law of Demand
A alw that states that there is an inverse relationship between the quantity demanded and the price of a good or service.
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Demand Curve
A graph showing how much will be demanded by consumers at any given price.
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Normal good
One where the quanity demanded increases in response to an increase in consumer incomes.
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Inferior good
One where the quanitity demanded decreases in response to an increase in consumer incomes.
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Substitutes
Two goods are substitues if the demand for one good is likely to rise if the price of the other good rises.
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Complements
Two goods are said to be complements if an increase in the price of one good causes the demand for the other good to fall.
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Elasticity
A measure of the sensitivity of one variable to change in another variable.
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Price elasticity of demand (PED)
A measure of the sensitivity of quantity demanded to a change in the price of a good or a service.
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Relatively elastic
A term used when the price elasticity of demanded is greater than 1 but less than infinity.
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relatively inelastic
A term used when the price elasticity of demand is less than 1 but greater than 0.
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Unitary inelastic
A term used when the price elasticity of demand is equal to 1.
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Income elasticity of demand (YED)
A measure of the sensitivity of quantity demanded to a change in consumer incomes.
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Luxury good
One for which the income elasticity of demand is positive and greater than 1, such that as income rises, consumers spend more proportionally more on the good.
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Necessity
A good for which the income elasticity of demand is positive, and less than 1, such that as income rises, consumers spend proportionally less on the good.
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Cross-price elasticity of demand (XED)
A measure of the sensitivity of quantity demanded of a good or service to a change in the price of some other good or service.
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Other cards in this set
Card 2
Front
Diminishing marginal utility
Back
Describes the situation where an individual gains less additional utility from consuming a product, the more of its consumed.
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