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Unit#2 NAME Economics Date/ Period Vocabulary Activity #1 Unit #2

Unit#2 NAME Economics Date/ Period Vocabulary Activity #1 Unit #2 Law of Demand -an increase in a goods price causes a decrease in quantity demanded Purchasing Power -the amount of money people have available to spend on goods and services

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Unit#2 NAME Economics Date/ Period Vocabulary Activity #1 Unit #2

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  1. Unit#2 NAME Economics Date/ Period Vocabulary Activity #1 Unit #2 • Law of Demand-an increase in a goods price causes a decrease in quantity demanded • Purchasing Power-the amount of money people have available to spend on goods and services • Income Effect- any increase or decrease in a consumers purchasing power caused by a change in price • Diminishing Marginal Utility- as more units of a product are consumed the satisfaction received from consuming each additional unit declines • * Copy exactly as they are written on you own paper

  2. Paraphrase is 5 words or less • Law of Demand- price goes up, Quanity-demaded down • Purchasing Power-money to spend • Income Effect- lower prices= more $; and vice versa • Diminishing Marginal Utility- more product consumed less satisfied

  3. Paraphrase is 5 words or less

  4. DEMAND Chapter 3

  5. SECTION 1: Nature of Demand Demand – the amount of a good or service that a consumer is willing and able to buy at various possible prices during a given time period Quantity Demanded – the amount of a good or service that a consumer is willing able to buy at each particular price during a given time period

  6. Before …… After 59 ½ hot dogs • Law of Demand – an increase in a good’s price causes a decrease in the quantity demanded (inverse effect) • Income effect – how much income or purchasing power does a consumer have • Substitution effect – tendency of consumers to substitute a similar, lower-priced item • Diminishing marginal utility – the usefulness or the amount of satisfaction decreases as more of the product is consumed

  7. Let’s auction off some candy! Demand schedules – lists the quantity of goods that consumers are willing and able to pay at a series of possible prices Demand curve – shows the relationship between the price of a product and the quantity demanded on a graph

  8. Demand Curve

  9. SECTION 2: Changes in Demand What causes demand to change? The determinants of demand include: Consumer tastes and preferences Market size Income Prices of related good substitute goods complementary goods Consumer expectations

  10. SECTION 3: Elasticity of Demand Elasticity of demand – is the degree to which changes in a good’s price affect the quantity demanded by consumers • Elastic demand – exists when a small change in a good’s price causes a major, opposite change in the quantity demanded. A good’s elasticity can change if: • The product is not a necessity • There are readily available substitutes • The product’s cost represents a large portion of a consumer’s income • Inelastic demand – exists when a change in a good’s price has little impact on the quantity demanded • The product is a necessity • There are few or no readily available substitutes for the product • The product’s cost represents a small portion of the consumer’s income

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