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LC Econ Consumer

LC Economics Consumer and Market

QuestionAnswer
Consumer A person who purchases goods and services.
Economic good A good that gives utility, is scarce relative to the demand for it and is transferable.
Income The flow of wealth received by an individual over a period of time.
Law of Diminishing Marginal Utility As extra units of a good are consumed, the utility or satisfaction gained from each extra unit of that good falls.
Law of Equi-MarginaI Returns (also called the Equi-Marginal Principle) To enjoy maximum utility, a consumer must spend his/her income so that the ratio of marginal utility to price is the same for all the goods he/she buys.
Marginal utility The extra satisfaction a person enjoys from consuming one extra unit of a good.
Transfer payments Payments made to individuals for which no factor of production is supplied in return.
Wealth The total stock of assets which a person owns at one time.
Welfare The overall well-being of an individual.
Utility The use or satisfaction a consumer gets from goods and services.
Commodity markets The markets where major commodities or raw materials are bought and sold.
Consumer's surplus The difference between the highest price a consumer is prepared to pay for a good and the price he/she actually pays.
Demand curve A graph showing the quantities of a good (or service) that consumers are willing to buy at different prices.
Demand schedule A list or table showing the quantities of a good (or service) that consumers are willing to buy at different prices.
Equilibrium price The price at which quantity demanded is equal to quantity supplied.
Equilibrium quantity The level of output where quantity demanded equals quantity supplied.
Factor market A market where a factor of production is bought and sold.
Final market A market that supplies goods or services that give consumers utility and for which they are willing to pay a price.
Foreign exchange market The market where the world's currencies are bought and sold.
Haggling The practice where buyers and sellers argue over the price of an item.
Intermediate market A market where a good is sold to be used as an input in the production of another good.
Assumptions concerning consumer behaviour 1. Consumers have limited incomes. 2. Consumers seek to get maximum utility (satisfaction). 3. Consumers will act rationally. 4. Consumers are subject to the Law of Diminishing Marginal Utility.
Characteristics of Economic Good 1. Price- it must command a price. 2. Utility- good must provide the consumer with some feeling of satisfaction. 3. Transferable- ownership/benefit must be capable of being given from one person to another.
Assumptions underlying the Law of Diminishing Marginal Utility 1. Applies only after a certain minimum (origin) has been consumed. 2. Sufficient time has not elapsed for circumstances to change. 3. Assumes income has not changed. 4. Does not apply to addictive goods/medicines.
Consumer Equilibrium The consumer is in equilibrium when they follow the equi-marginal principle (to obtain maximum utility). Consumer spends income so the ratio of marginal utility to price is the same. Maximum utility when consumer has same utility from each good.
Market The bringing together of potential buyers of a good or service with potential sellers Of that good or service.
Producer's surplus The difference between the lowest price a producer or seller is prepared to accept for a good and the price he/she actually receives.
Stock Exchange A market where shares in public companies and units of government stock are bought and sold.
Supply curve A graph showing the quantities Of a good (or service) that producers are willing to supply at different prices.
Supply schedule A list or table showing the quantities of a good (or service) that producers are willing to supply at different prices.
Created by: MrFromholz