1. MICROECONOMICS

2. Microeconomics-the study of choices made by individuals, households and firms (companies)

4. Demand-Amount of a good or a service a consumer is willing and able to buy at various prices during a given time
Quantity Demanded-Amount of a good or a service that a consumer is willing and able to buy at each particular price.

5. Law of Demand
An increase in the price of a good causes a decrease in the quantity demanded
Price and quantity demanded works inversely=↓↑

6. Law of Demand can be explained by…
Income effect-change in quantity demanded because of an increase in a consumer’s purchasing power caused by a change in price…works conversely
Substitution effect-change in quantity demanded because change in price that caused Consumer to substitute for similar lower-priced product works inversely
Diminishing marginal (additional) utility-the more of a product consumed, the less satisfaction you receive from it…works inversely

7. Demand Curve-illustrates the relationship between price and quantity demanded.

8. Determinants of Demands
Factors other price that causes a change in demand

9. Consumer Tastes and Preferences
Changes in consumer tastes and preferences can have a major impact on demand for products
Ex. The popularity of the Backstreet Boys has dwindled. Their music is bought less

10. Market Size Changes in the size of a market affect demand too
Ex. Pres. Nixon opened trade with China

11. Income
When people have a higher income they can buy more consumer goods which increases the demand for the good
Ex. A person gets a $10,000 raise.

12. Prices of a Related Good
The demand for a good is often related to the demand for related goods
Substitute – Goods that can be used to replace the purchase of similar goods
Complementary Good – Goods that are commonly used with other goods

13. Consumer Expectations