Economics chapter 5

utility

the satisfaction gained by consuming goods and services

scarcity

when something is in short supply

total utility

the total satisfaction gained by adding all the utils

util

a measure for the value of satisfaction

marginal utility

the satisfaction gained from consuming the last unit

law of diminishing marginal utility

the law Staes that total utility will rise with each additional unit consumed but at a slower rate, until total utility decreases due to the decreased marginal utility of each unit

price elasticity of demand (PED)

a measure of how responsive demand is to change in price, will always be negative

factors effecting price elasticity of demand (PED)

method of payment, time period allowed and proportion of income

Price elasticity of supply(PES)

measures responsiveness of supply to change in price, will always be positive

factors influencing the PES

number of suppliers in market, time taken to produce product and nature of product and durability

income elasticity of demand(YED)

it can be negative or positive, if zero not affected, if positive it is a normal good where demand increases when income increases but if negative it is an inferior good where demand decreases when income increases

Cross price elasticity of demand(CPED)

Measures the responsiveness of quantity demand of good A to a change in price of good B,if positive it is a substitute good if negative it is a complementary good and will never be 0,if 0 goods wont be related