economics chapter 3
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| Demand | The number of units of goods a consumer will buy at various prices.
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| Individual demand | The quantity of a good an individual consumer demands at different prices.
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| Market demand | Total quantity of a good that all consumers demand at different prices.
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| The Law of Demand: | States that as prices rise the quantity demanded will fall and vice versa, ceteris paribus (all other things being equal)
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| Consumer Surplus | The difference between what a consumer actually pays for a good and the maximum s/he was willing to pay for the good rather than do without it.
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| Derived Demand | Where a factor of production is not demanded for its own sake but rather for its contribution to the production process, e.g. timber.
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| Income effect: | When the price of a good falls it means that a consumer’s real income will rise.
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| Joint Demand | Where two (or more) goods are used in conjunction with each other in order to achieve utility. They are complementary goods, for example, golf clubs and golf balls.
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| Effective demand | Demand supported by the necessary purchasing power.
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| Composite demand: | Occurs when a commodity is required for a number of uses, e.g. sugar.
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| Normal Goods | Obey the law of demand and have a positive income effect.
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| Inferior goods: | Have a negative income effect
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| Giffen goods: | Have a positive price effect. More is bought as the price rises, and less is bought as the price falls.
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| Substitute goods | Goods that satisfy the same needs and can be considered alternatives to each other, e.g. Lyons and Barry’s tea.
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| Complementary goods | Goods that are used jointly. The use of one involves the other, e.g. cars and petrol.
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| Substitution effect | When the price of a good rises customers may shift to cheaper alternatives to maximise their utility.
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