IB Economics Vocabulary Set 2

ceteris paribus

a latin expression meaning “other things being equal”

demand

the relationship between possible prices of a good or service and the quantities that individuals are willing and able to buy over some time period, ceteris paribus

demand curve

a curve illustrating the relationship between possible prices of a good or service and the quantities that individuals are willing and able to buy over some time period, ceteris paribus. It is normally downward sloping

quantity demanded

the quantity of a good or service that individuals are willing and able to buy at a particular price over a given time period, ceteris paribus

law of demand

a law stating that as the price of a good falls, the quantity demanded will increase over a certain period of time, ceteris paribus

price elasticity of demand (PED)

a measure of how much the quantity demanded of a good responds to a change in the price of that good, computed as the percentage change in quantity demand divided by the percentage change in price

price elastic demand

a change in price results in a relatively larger change in quantity demanded in the opposite direction. |PED| > 1

price inelastic demand

a change in price results in a relatively smaller change in quantity demand in the opposite direction. |PED| < 1

total revenue

the amount of revenue received by a firm from the sale of a particular quantity of output (equal to price times quantity solo)

substitutes

goods that can be used in place of each other, as they satisfy a similar need

complements

goods that are jointly consumed, for example, coffee and sugar

inferior goods

lower quality goods for which higher quality substitutes exist; if incomes rise, demand for the lower quality goods decreases

normal goods

a good where the demand for it increases as income increases

price expectations

the forecasts or views that consumers or firms hold about future price movements that play a role in determining demand