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LC Econ C-P & Demand
LC Economics Consumer, Producer and Demand
| Question | Answer |
|---|---|
| Consumer Sovereignty | Implies that it is the consumer who determines what goods will be created, as producers will only make those goods which are demanded in sufficient quantities to make them profitable. |
| Indicative Planning | Government negotiates collectively with the trade unions, industry representatives, employer representatives to create strategies, e.g. national wage agreements and plans for economic development. |
| Social Partners | The various bodies involved in negotiating with the government are collectively known as the social partners. |
| Market Price | The market price of a product is the price at which the product is currently selling. |
| Supply | Is the number of units of a particular good/product which a producer is willing to make available for sale at any given market price at any given time. |
| Demand | Is the number of units of a particular which consumers are willing to purchase at any given market price at any given time. |
| Market Mechanism | This is the interaction between supply and demand for a product. |
| Consumer Surplus | Is the difference between the market price of a product and the higher price which a consumer is willing to pay rather than do without. |
| Factor Markets | These are the markets for the factors of production. The buyers are the employers and the sellers are the people who supply these factors. |
| Intermediate Markets | In these markets the buyers can either buy goods to add value to them and sell them onto somebody else or to process them and to sell the finished goods to the wholesaler or the retailer e.g. buying raw materials. |
| Final Market | The goods are sold to their final market i.e. to the consumer. |
| Demand | Is the number of units of a particular which consumers are willing to purchase at any given market price at any given time. |
| Demand Schedule | Is a table showing demand the demand for a good at any given market price at any given time. |
| Utility | Is the amount of benefit or satisfaction derived from the consumption of a good. It is measured in Utils. |
| Marginal Utility | Is the addition to the total utility derived from the consumption of one extra unit of a good. |
| An Economic Good | Is one which commands price i.e. a product which people are willing to pay for. |
| Law of Diminishing Marginal Utility | States that as a consumer consumes extra units of a good, then at some point the marginal utility derived from the consumption extra units of that good, will decrease. |
| Equilibrium | Means the ideal situation to be in under a given set of circumstances. |
| The Principle Of Equi-Marginal Utility | States that a consumer will be in equilibrium when his/her income is spent in such a way that the ratio of Marginal Utility to price is the same for all goods which he/she consumes. |
| Normal Good | Is one which has a positive income effect. |
| Positive Income Effect | Means that a change in income will cause a change in demand in the same direction as the change in income. This is true for normal goods. |
| Inferior Goods | Are goods which have a negative income effect. |
| Negative Income Effect | Means that a change in income will cause demand to change in the opposite direction than the change in income. This happens with inferior goods. |
| Normal Goods | Have the ordinary reaction to a change in price i.e. when price goes up, demand goes down and visa versa. |
| Inferior Good | Have an unnatural reaction to a change in income i.e. when income goes up, demand goes down and visa versa. |
| Giffen Goods | Is a good with a positive price elasticity of demand i.e. more is bough as the price rises and less when the price falls. |
| Goods of Addiction | In the case of those goods to which a person becomes addicted to e.g. drugs, alcohol and cigarettes, they tend not to act rationally. They become so addicted that even an increase in the price of the commodity may not cause a fall in demand. |
| Substitute Goods | Are two or more different goods which can be substituted for each other to satisfy any one given need or want e.g. bus and rail transport, Ford and Opel cars. |
| Complementary Goods | Are two or more different goods that must be purchased to satisfy a given need or want. e.g. Tennis ball and tennis racket. |
| Goods in Derived Demand | A good is in derived demand when it is not demanded for its own direct utility but for the additional utility which it gives to another good e.g. the demand for bricks due to the demand for housing. |
| Goods of Ostentatious Consumption / Snob Goods | Some people buy expensive goods to show off their wealth in a very obvious manner. When the price of those goods increase, the demand increases to highlight that they can afford it while others can not. |
| Paradox of Value | This is when a good is high in value but low in use or when a good is low in value but high in use e.g. Diamonds are high in value but low in use and water is high in use but low in value. |
Created by:
MrFromholz
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