Theory of demand and supply

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19 Terms

1
Demand
The desire or will of any person or community for a commodity, considering both the desire to purchase and the ability to pay.
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2
Direct Demand
Demand for a final object or commodity as opposed to demand for inputs or raw materials.
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3
Price Demand
The quantities of a commodity that consumers would purchase at various prices, showing an inverse relationship between price and quantity demanded.
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4
Income Demand
The quantities of goods and services purchased by consumers at various levels of income, reflecting a positive relationship for normal goods.
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5
Cross Demand
Changes in the demand for one good due to changes in the price of another related good, encompassing both substitute and complementary goods.
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6
Substitute Goods
Goods used in place of each other; for example, Fanta and Mirinda.
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7
Complementary Goods
Goods that are used together to satisfy a want; for example, printers and ink cartridges.
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8
Derived Demand
Demand for goods and services that are used to produce other goods and services.
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9
Joint Demand
Demand for several goods and services with a single purpose.
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10
Shift in Demand Curve
Change in the quantity of a commodity demanded at the same price due to changes in factors other than the price of the commodity.
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11
Law of Demand
Describes the inverse relationship between price and quantity demanded, wherein price falls, demand increases and vice versa.
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12
Giffen Goods
Goods whose quantity demanded increases as the price rises, violating the law of demand.
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13
Market Equilibrium
A state where the quantity demanded equals the quantity supplied, resulting in no tendency for price to change.
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14
Supply Function
Shows the relationship between supply and its determinants, typically indicating a positive relationship between price and quantity supplied.
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15
Linear Supply Function
A supply function where both price and quantity supplied change at a constant rate.
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16
Non-linear Supply Function
A supply function where the change in price and supply does not occur at a constant rate.
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17
Determinants of Supply
Factors that determine the quantity of a good or service that producers are willing to sell, including price, technology, and number of firms.
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18
Rightward Shift in Supply Curve
Indicates an increase in supply, meaning more is supplied at any given price.
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19
Leftward Shift in Supply Curve
Indicates a decrease in supply, meaning less is supplied at any given price.
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