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Economics

The Consumer

TermDefinition
Consumer Is an individual who makes the decision whether to buy goods or services.
Utility Is the amount of benefit or satisfaction derived from the consumption of a good or service.
Economic Good Is a product or service which commands a price, derives utility and is transferable.
Characteristics of Economics Goods
-Price The good must be scarce in relation to the demand for it. There is not enough of it to satisfy the demand of all those who want it.
-Utility The good must provide the consumer with some feeling of satisfaction.
-Transferable Ownership or benefit must be capable of being given from one.
Marginal Utility (MU) Is the addition to total utility brought about by the extra utility received caused by the consumption of one extra unit of good. In other words, marginal utlity refers to the extra satisfaction a consumer gets from consuming an extra unit of the good.
The Law of Diminishing Marginal Utility States that as more units of a good are consumed, a point will be reached where marginal (extra) utility eventually begins to decline.
Equilibrium Is the condition where there is no tendency to change.
The Equi-Marginal Utility Principle Explains the behaviour of a consumer us distributing their limited income among various goods and services.
Demand Is the number of units of goods a consumer will buy at various prices.
The Law of demand States that and in increase in prince leads to a decrease in quantity demanded (Price goes up, Quantity goes down) or a decrease in price leads to an increase in quantity demanded (Price goes down, Quantity goes up),
Consumer Surplus The benefit to consumers due to the difference between what consumers actually pay to consume a good and what they would have been willing to pay rather than go without the good.
Individual Demand The benefit to consumers due to the difference between what consumers actually pay to consume a good and what they would have been willing to pay rather than go without the good.
Market demand/Aggregate demand Aggregate demand shows the different quantities of a good that all consumers in the market are prepared to buy at wach price. It is derived by adding together all individual quantities demanded for a good.
Demand schedule A demand schedule is a table that shows the different quantities demanded for a good ar various market prices at any given time.
Individual demand schedule Lists the different quantities of a good that an individual consumer is prepared to buy at each price.
Market/Aggregate demand schedule Lista the different quantities of a good that all consumers in the market are prepared to buy at each price. It is derived by adding together all the individual demand schedules for the good.
Demand curve Is a graph illustrating the demand for a good at various prices at any given time.
Effective demand Consumers must be willing to buy and be capable of paying the price set by the supplier.
Derived demand Derived demand occurs when one comodity is an essential part of another commodity and it is demanded not for its own sake but because it is required to manufacture another good.
Composite demand Composite demand occurs when a commodity is required for a number of different uses.
Joint demand Joint demand occurs when the demand for one commodity is joined with the demand for another.
Shift in the demand curve Is caused by a change in any non-price determinant of demand.
Movement along the demand curve Is caused by a change in the price of the good itself.
Rightward shift If there is an increase in quantity demanded for a good, the demand curve will shift to the right.
Lefrward shift If there is a decrease in the quantity demanded for a good, the demand curve will shift to the left.
Complementary goods Are goods that are used jointly. The use of one involves the use of the other.
Substitute goods Are goods that satisfy the same needs and thus can be considered as alternatives to each other.
Normal good Is a good that obeys the law of demand and which has a positive income effect.
Inferior good Is a good with negative income effect.
Giffen Goods Are goods with a positive price effect.
Substitution Effect
Created by: IvanMenendez
 

 



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