What is microeconomics? Microeconomics is the part economic theory that deals with behavior and decision making by individual units, such as people and firms.

What is a demand curve and what is a demand schedule? A demand curve is a graph showing the quantity demanded at each and every possible price that might prevail in the market at a given time. A demand schedule is a listing showing the quantity demanded at all possible prices that might prevail in the market at a given time.

What is the law of demand? The law of demand is a rule stating that more will be demanded at lower prices and less at higher prices; an inverse relationship between price and quantity demanded.

What is the market demand curve? The market demand curve shows the quantities demanded by everyone who is interested in purchasing a product at all possible prices.

What are marginal utility and diminishing market utility? Marginal utility is the extra usefulness or additional satisfaction a person gets from acquiring or using one more unit of a product. Diminishing market utility is the feeling that as we use more and more of a product we no longer receive the extra satisfaction we get from using additional quantities of the product.

What is the relationship between the price of an item and the quantity demanded? The quantity demanded varies inversely with its price. As the price of the item goes up, demand for it goes down. When the price of an item does down, buyers have an incentive to purchase more of the item.

Explain the income effect. The income effect is when price changes affect consumers’ spending power and, as a result, consumers demand more or less of a good or service, we call this the income effect.

Explain the term complements as it relates to economics. Complements are products that increase the use of other products, products related in such a way that an increase in the price of one reduces the demand for both.

What is the effect of a change in price on quantity demanded? A change in price results in a change in quantity demanded. When prices go up, quantity demanded goes down, and vice versa.

What factors, excluding price, affect demand? -consumer income -expectations -tastes -substitutes -complements -number of consumers

What does the term demand elasticity mean? Demand elasticity is the extent to which a change in price causes a change in the quantity demanded.

What is elastic demand, inelastic demand, and unit elastic demand mean? Elastic demand is the type of elasticity in which a change in the independent variable (usually price) results in a larger change in the dependent variable (usually quantity demanded or supplied). Inelastic demand is the type of elasticity where the percentage change in the independent variable (usually price) causes a less than proportionate change in the dependent variable (usually quantity demanded or supplied). Unit elastic demand is the type of elasticity where a change in the independent variable (usually price) generates a proportional change of the dependent variable (usually quantity demanded or supplied)

Give examples of goods that are considered elastic and inelastic. Many food goods are considered elastic since substitutes can be easily found. Medicine and cigarettes are inelastic since they are necessary (to some people) and have few substitutes.

How do we measure the three causes of demand elasticity? The three causes of demand elasticity are measured by looking at the relative change in demand as it responds to a change in price.

How does the total expenditures test help determine demand elasticity? By finding out what the total expenditures are for a product, a business is able to determine the demand elasticity. This is important to fixing an appropriate price for an item.

What factors determine a products demand elasticity? Factors include whether the purchase can be delayed, whether there are adequate substitutes, and the amount of income required to make the purchase.