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Demand and Supply
Calasanctius
| Term | Definition |
|---|---|
| Snob Good | A rise in price of this good will cause an increase in quantity demanded and vice-versa |
| Law of Equi-Marginal returns / Equi- Marginal Principle | Consumers spend their income where the marginal utility to price is the same for all goods |
| Lists 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 | Market Demand Schedule |
| Real Income | The purchasing power of a person's money, income adjusted for inflation |
| Giffen Good | A good for which price rises quantity demanded rises |
| If the price rises , quantity demanded falls and vice-versa | Law of Demand |
| Substitution effect | If the price of a good falls , the consumer is likely to buy more of it because it is now cheaper relative to other goods |
| It causes a movement along a demand curve | Rise in the price of the good /service |
| Individual demand schedule | A table showing the different quantities of a good a consumer is prepared to buy at each price |
| Factors affecting the demand for a good which shifts the demand curve inwards or outwards | Price of other goods, Income,Tastes ,Govt, Expectations of future prices, Unplanned factors |
| Marginal Utility | The extra satisfaction a consumer enjoys from consuming an extra unit of a good |
| Normal Good | A good with a positive income effect Y increases , D increases |
| Transfer Payments (social welfare) | Payments to individuals where no FOP is supplied in return |
| Inferior goods | A good with negative income effect As Income increases , Demand decreases |
| Substitute goods | Good that satisfy the same needs , they are similar |
| Income effect | If the price of a good falls the real income of the consumer is increased, allowing more of the good to be purchased |
| Complementary goods | Goods that are in joint demand , the use of one involves the use of the other |
| Demand curve | A graph showing the different quantities of a good that an individual consumer is prepared to buy at each price |
| Effective demand | Consumers must be willing to buy AND be capable of paying the price set by the supplier |
| Demand | The amount consumers desire to purchase at various prices at any given time |
| Consumer Surplus | The difference between the highest price a consumer is willing to and what they actually pay for a good rather than do without it |
| Producer Surplus | The difference between the lowest price a producer is willing to accept for a good and the price they actually receive |
| Law of supply | If the price rises quantity supplied rises |
| Factors affecting the supply of a good which may shift the demand curve inwards or outwards | Price of related goods, cost of production, unplanned factors, state of technology |
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Calasanctius Eco
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