ECON-2006EG Study Guide - Quiz Guide: Diminishing Returns, Demand Curve, Price Discrimination
Document Summary
Demand curve: the relationship between price and quantity demanded of a particular product. Factors influencing demand: price of substitutes (rival products) and complements, consumer income. Normal goods: demanded more when income increases and less when income falls. Inferior goods: demanded more when income level falls and demanded less when income increases: tastes and preferences advertising can play two roles: provides consumers with information about products, and trying to change tastes and preferences, price expectations. Law of demand: ceteris parabus, as the price of a product falls, more will be demanded. Elasticity: measure of responsiveness of demand to a change in price. Determinants of elasticity: number of substitutes, demand, definition of the market. Elasticity: percentage change in quantity demanded/percentage change in price. Inelastic demand: below 1, a change in price will lead to a proportionately smaller change in the quantity demanded. Income elasticity: measures the responsiveness of demand to a change in income: