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Demand
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Consumer willingness and ability to buy products
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Microeconomics
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the study of how households and firms make decisions and how they interact in markets
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Ceteris Paribus
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a Latin phrase that means "all other things held constant"
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Demand Schedule
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a table that shows the relationship between the price of a good and the quantity demanded
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Demand curve
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a graph of the relationship between the price of a good and the quantity demanded
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Law of Demand
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consumers buy more of a good when its price decreases and less when its price increases
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The Market Demand Curve
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the demand curve that shows the quantities demanded by everyone who is interested in purchasing the product
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Marginal Utility
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an additional amount of satisfaction
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diminishing marginal utility
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Decreasing satisfaction or usefulness as additional units of a product are acquired
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change in quanity demanded
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a change that is graphically represented as a movement along the demand curve
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Income effect
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the change in consumption resulting from a change in real income
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Substitution effect
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when consumers react to an increase in a good's price by consuming less of that good and more of other goods
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Change in demand
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a shift of the demand curve, which changes the quantity demanded at any given price
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Substitutes
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two goods for which an increase in the price of one leads to an increase in the demand for the other
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Complements
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two goods for which an increase in the price of one leads to a decrease in the demand for both
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Elasticity
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a measure of the responsiveness of quantity demanded or quantity supplied to a change in one of its determinants
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Demand elasticity
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the extent to which a change in price causes a change in the quantity demanded
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Elastic Demand
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A situation in which consumer demand is sensitive to changes in price
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Inelastic demand
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A situation in which an increase or a decrease in price will not significantly affect demand for the product
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Unit elastic demand
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demand is unit elastic when the percentage change in quantity demanded is equal to the percentage change in price, so the price elasticity is equal to 1 in absolute value
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