# Microeconomics

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1. Market
All of the arrangements that individuals have for exchanging with one another. Thus, for example, we can speak of the labor market,the automobile market, and the credit market.

Goods and services are sold in markets
2. Demand
A schedule showing how much of a good or service people will purchase at any price during a specified time period, other things being constant.

It refers to the quantities of specific goods or services that individuals, taken singly or as a group, will purchase at various possible prices, other things being constant.
3. Law of demand
The observation that there is a negative, or inverse, relationship between the price of any good or service and the quantity demanded,holding other factors constant.

When the price of a good goes up, people buy less of it, other things being equal.When the price of a good goes down, people buy more of it, other things beingequal.
4. Ceteris paribus conditions
Determinants of the relationship between price and quantity that are unchanged along a curve. Changes in these factors cause the curve to shift.
5. Other things being equal.(ceteris paribus)
It means, for example, that when we predict that people will buy fewer Blu-ray disc players if their price goes up, we are holding constant the price of all other goods in the economy as well as people’s incomes.
6. Relative price
The money price of one commodity divided by the money price of another commodity; the number of units of one commodity that must be sacrificed to purchase one unit of another commodity.
7. Money price
The price expressed in today’s dollars; also called the absolute or nominal price.
8. constant-quality units
9. demand schedule
it gives a schedule of alternative quantities demanded within a time-frame at different possible prices.
10. Demand curve
A graphical representation of the demand schedule; a negatively sloped line showing the inverse relationship between the price and the quantity demanded (other things being equal).

Downward sloping to show the inverse relationship between the price and quantity demanded. It is a graphical representation of the law of demand
11. Market demand
The demand of all consumers in the market place for a particular good or service.The summation at each price of the quantity demanded by each individual.

Demand deals solely with the relationship between consumer and market prices
12. Normal goods
Goods for which demand rises as income rises. Most goods are normal goods.

Most goods, such as shoes, computers, and flash memory drives, energy, car, house, etc., are “normal goods.”
13. Inferior goods
Goods for which demand falls as income rises.

As households get richer, they tend to purchase fewer and fewer beans, roman noddles, bus rides, etc.
14. Related goods
goods for which demand is interdependent. If a change in the price of one good shifts the demand for another good, those two goods have interdependent demands.

There are two types of demand inter dependencies: those in which goods are substitutes and those in which goods are complements
15. Substitutes
Two goods are substitutes when a change in the price of one causes a shift in demand for the other in the same direction as the price change.

Substitutes can be consumed to satisfy the same basic want.

Butter & Margin
16. Shift in Demand
Shift Right = Outward Shift = Expanding (Rise in Demand)

Shift Left = Inward Shift = Contracting (Fall in Demand)

1. consumers’ income

2. tastes and preferences;

3. the prices of related goods (Substitutions and Compliments)

3. expectations regarding future prices and future incomes

4. market size (number of potential buyers)
17. Complements
Two goods are complements when a change in the price of one causes an opposite shift in the demand for the other good.

• desktop computers & printers
• Gars & Gas
18. Expectation (Shift in Demand)
Consumers’ expectations regarding future prices and future incomes will prompt them to buy more or less of a particular good without a change in its current money price.

expectations that goods will not be available at any price will induce consumers to stock up now, increasing current demand.
19. Incomes (Demand Shift)
For most goods, an increase in income will lead to an increase in demand.That is, an increase in income will lead to a rightward shift in the position of the demand curve

1. Goods for which the demand rises when consumer income rises are called normal goods.

2.Goods for which the demand falls when consumer income rises are called inferior goods.
20. TASTES AND PREFERENCES (Demand Shift)
A change in consumer tastes in favor of a good can shift its demand curve outward to the right.

Economists have little to say about the determination of tastes;that is, they don’t have any “good” theories of taste determination or why people buyone brand of product rather than others
21. MARKET SIZE (NUMBER OF POTENTIAL BUYERS) (Demand Shift)
An increase in the number of potential buyers (holding buyers’ incomes constant) at any given price shifts the market demand curve outward. Conversely, a reduction in the number of potential buyers at any given price shifts the market demand curve inward.

(Population)
22. Change in Demand
Whenever there is a change in a ceteris paribus condition,there will be a change in demand—a shift in the entire demand curve to the right or to the left.

A change or shift in demand is a movement of the entire curve. The only thing that can cause the entire curve to move is a change in a determinant other than the good’s own price.

• 1. consumers’ income,
• 2. tastes and preferences
• 3. the prices of related goods
• 4. expectations market size
23. Quantity Demanded
When price changes, quantity demanded changes according to the law of demand, and there will be a movement from one point to another along the same demand curve.

A change in a good’s own price leads to a change in quantity demanded for any given demand curve, other things held constant. This is a movement along the curve.

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 Author: damea134 ID: 227157 Filename: Microeconomics Updated: 2013-07-15 16:54:33 Tags: Chapter Demand Folders: Description: Miller Show Answers:

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