chapter 3- demand

• What is demand?

  The quantity of a good or service that consumers are able and willing to buy given its price, the price of other goods, and consumers' incomes and preferences.
• What is market demand?

  The total quantity of a good or service that all potential buyers are able and willing to buy at any given price in a given time period.
• What is joint demand?

  Demand for goods that are interdependent, such that they are demanded together
• What is composite demand?

  Demand for a good which has more than one use
• What is competitive demand?

  Demand for goods that are in competition with each other, as they are substitutes.
• What is the law of demand?

  A law that states that there is an inverse relationship between quantity demanded and the price of a good or service, ceteris paribus.
• What is the demand curve?

  A curve showing how much of a good will be demanded by consumers at any given price.
• What is the substitution effect?

  If the price of one good increases, demand for a cheaper, similar (substitute) good increases
• What is the income effect?

  When quantity demanded changes due to a change in consumer income
• What is a normal good?

  A good for which the quantity demanded increases in response to an increase in consumer incomes
• What is an inferior good?

  A good for which the quantity demanded decreases in response to an increase in consumer incomes.
• What is a Giffen good?

  A good which is so strongly inferior that its demand curve slopes upward because the (negative) income effect is larger than the substitution effect
• What is consumer surplus?

  It is the difference between total willingness to pay and the total amount actually paid.