Economic Theory : Demand Analysis - II

Flashcards on Demand Analysis based on lecture notes.

Indifference Curves

A graphical depiction that represent the combinations of products which provide the similar kind of satisfaction to consumers that makes them indifferent.

Diminishing Marginal Rate of Substitution

The consumer is willing to trade off the amount of a commodity for another commodity since it provides them with the same level of utility like that of the previous commodity.

Indifference Curve

Measures utility in an ordinal manner where it provides a focal point of the various combinations of two goods providing the same satisfaction level or utility to consumers.

Budget Line

The budget line portrays the various combinations of the two goods through a graphical representation of the combinations that are affordable by the customer at the given market prices and within his or her specific income.

Consumer’s Equilibrium

Consumers gain utility from every commodity they consume, and the utility depends on the price of the product. The point at which the marginal utility of a product is equal to the price represents the maximum satisfaction level of the consumer.

Price-Effect

The change in the quantity demanded because of a change in its price.

Substitute Goods

These are goods that are almost similar to one another, and they satisfy a similar need or desire. These are goods that can be consumed in place of another.

Complementary Goods

These are goods that add value to the other goods and are used in combination with other goods.

Marginal Rate of Substitution (MRS)

Explains where the consumer can give up the quantity of one good for additional units of another good at the same level of utility.

Demand Curve

A graphical representation of his or her demand schedule. It shows how the quantity demanded of a commodity change with variation in its price.