Questions and Answers
Which term refers to the concept that as the price of a good increases, the quantity demanded decreases?
Law of Demand
What does the term 'Income Effect' refer to?
The change in quantity demanded due to changes in consumer income
What is the 'Price of Substitute' in economics?
The price of a good that is used as a substitute for another good
Which term refers to the concept that measures the responsiveness of quantity demanded to a change in price?
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What does the term 'Price of Compliment' refer to in economics?
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What is 'Elastic Demand' in economics?
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Study Notes
Law of Demand
- The law of demand states that as the price of a good increases, the quantity demanded decreases, ceteris paribus (all other things being equal).
Income Effect
- The income effect refers to the change in quantity demanded of a good or service resulting from a change in the consumer's purchasing power, typically due to a change in income.
Price of Substitute
- The price of a substitute is the price of a good or service that can be used in place of another good or service, influencing the demand for the original good.
Elasticity of Demand
- Elasticity of demand measures the responsiveness of quantity demanded to a change in price, with high elasticity indicating a large change in quantity demanded in response to a small price change.
Price of Complement
- The price of a complement is the price of a good or service used together with another good or service, influencing the demand for the original good.
Elastic Demand
- Elastic demand refers to a situation where a small change in price leads to a large change in the quantity demanded, often characterized by a high elasticity of demand.
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