Econ- Exam I- Chapter 3

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  1. perfectly competitive market:
    • 1.) many buyers and sellers
    • 2.) all firms selling identical product
    • 3.) no barriers to new firms entering
  2. demand curve:
    shows the relationship between the price of a product and the quantity demanded
  3. market demand:
    demand by all consumers of a given G or S
  4. law of demand:
    holding everything constant, when the P of a product falls the quantity demanded will increase
  5. substitution effect:
    change in the quantity demanded of a G that results from a change in price
  6. income effect:
    change in the quantity demanded of a good that results from the effect of a change in the good's price on consumers' purchasing power
  7. normal good:
    demand increases as income rises, vice versa
  8. inferior good:
    demand increases as income falls
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34803
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Econ- Exam I- Chapter 3
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macro
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