Economics booklet two

key terms from booklet two

Demand

The amount of a good or service consumers are willing and able to buy at each price.

Effective demand

Demand supported by the ability to pay.

Market demand

The total demand of all consumers in a market at each price.

Contraction in demand

A fall in quantity demanded caused by a rise in price.

Extension in demand

An increase in quantity demanded caused by a fall in price.

Normal goods

Goods for which demand increases as income increases.

Inferior goods

Goods for which demand falls as income increases.

Complementary goods

Goods that are consumed together, such as cars and petrol.

Composite demand

When a good is demanded for more than one purpose, so using it for one purpose reduces its availability for another.

Derived demand

When demand for one good or service is caused by demand for another.

Supply

The amount of a good or service producers are willing to offer for sale at each price.

Planned supply

The amount producers plan to produce at each price.

Actual supply

The amount producers actually produce, which may differ from planned supply.

Market supply

The total supply of all producers in a market at each price.

Extension in supply

An increase in quantity supplied caused by a rise in price.

Contraction in supply

A decrease in quantity supplied caused by a fall in price.

Joint supply

When producing one good also results in the production of another good.

Equilibrium

The price where quantity demanded equals quantity supplied.

Disequilibrium

A situation where quantity demanded does not equal quantity supplied.

Excess supply

When quantity supplied is greater than quantity demanded at a given price.

Market clearing price

The price at which all goods supplied are demanded.

Excess demand

When quantity demanded is greater than quantity supplied at a given price.

Substitutes

Goods that can be used as alternatives to each other, such as bus and rail.

Commodity

A good traded in bulk, usually raw materials or semi-manufactured goods.