econ ch 4 individual and market demand

• What does the Price-Consumption Curve represent?

  Utility-maximizing combinations of two goods
• What does the Individual Demand Curve show?

  Quantity of a good a consumer buys at prices
• What does the Income-Consumption Curve illustrate?

  Utility-maximizing combinations as income changes
• What is the Engel Curve used for?

  Relates quantity consumed to income
• What defines a Normal Good?

  Demand increases with income
• What characterizes an Inferior Good?

  Demand decreases with income
• What happens to demand for substitutes when the price of one increases?

  Demand for the other increases
• What occurs to demand for complements when the price of one increases?

  Demand for the other decreases
• What is the Substitution Effect?

  Change in consumption due to relative price change
• What is the Income Effect?

  Change in consumption from increased purchasing power
• What is a Giffen Good?

  Inferior good with upward-sloping demand curve
• What does the Market Demand Curve represent?

  Total quantity demanded by all consumers
• What is Isoelastic Demand?

  Constant price elasticity
• What drives Speculative Demand?

  Expected future price increases
• What is Consumer Surplus?

  Difference between willingness to pay and actual price
• How is Consumer Benefit measured?

  Area under demand curve above market price line
• What is a Network Externality?

  Demand affected by others’ consumption
• What is the Bandwagon Effect?

  Demand increases as others buy
• What is the Snob Effect?

  Demand decreases as others buy
• What is the Least Squares Method?

  Statistical approach to estimating demand relationships
• What does Positive Cross-Price Elasticity indicate?

  Goods are substitutes
• What does Negative Cross-Price Elasticity indicate?

  Goods are complements