(not complete) 1.2 defitions

Consumer goods and services

goods and services that help us satisfy our needs and wants directly and is used for final consumption

Demand

Quantity of a good or service that consumers are willing and able to buy at a given price in a given time period.

Demand curve

A demand curve shows the relationship between the price of an item and the quantity demanded over a period of time. For normal goods, more of a product will be demanded as the price falls.

Diminishing marginal utility

Marginal utility is the change in satisfaction from consuming an extra unit of a good or service. Beyond a certain point, marginal utility may start to fall (diminish). If marginal utility becomes negative, then consuming an extra unit will cause total utility to fall.

Effective demand

Demand in economics must be effective. Only when a consumer's desire to buy a product is backed up by an ability to pay for it do we speak of demand.

Effective demand is the desire for a good or service that is backed by the ability and willingness to pay for it at a given price over a specific period of time.

Excess demand

The difference between the quantity supplied and the higher quantity demanded when price is set below the equilibrium price (or a situation where quantity demanded is greater than quantity supplied at a given price). This will result in queuing and an upward pressure on price.

Law of demand

The law of demand is that there is an inverse relationship between the price of a good and demand. As prices fall, we see an expansion of demand. If price rises, there should be a contraction of demand.

Perverse demand curve

A perverse demand curve is one which slopes upwards from left to right. Therefore, an increase in price leads to an increase in demand. This may happen where goods are strongly affected by price expectations.

Willingness to pay

The maximum price a consumer is prepared to pay to obtain a product.

Competitive supply

Goods in competitive supply are alternative products a firm could make with its resources. E.g. a farmer can plant potatoes or carrots, an electronics factory can produce smartphones or smartwatches, and land has many uses such as commercial or residential.

Excess supply

When supply is greater than demand and there are unsold goods in the market. Surpluses put downward pressure on the market price. or (

A situation where quantity supplied is greater than quantity demanded at a given price.)

Law of supply

The law of supply is that there is a positive relationship between the price of a good and supply. As prices rise, we see an expansion of supply. If prices fall, there should be a contraction of supply.

Market supply

Market supply is the total amount of an item producers are willing and able to sell at different prices, over a given period of time e.g. one month. In an industry, a market supply curve is the horizontal summation of each individual firm’s supply curve.

Supply

Quantity of a good or service that a producer is willing and able to supply onto the market at a given price in a given time period.

Supply chain

Different stages of making, distributing and selling a good or service from the production of parts, through to distribution and sale of the product.

Supply curve

The relationship between market price and quantity supplied onto the market.

Disequilibrium prices

Prices where demand and supply are out of balance are points of disequilibrium. There is either excess demand (market prices too low) or excess supply (market prices too high).

Prices where demand and supply are out of balance. There is either excess demand (market prices too low) or excess supply (market prices too high).

Equilibrium (price)

Equilibrium means ‘at rest’ or ‘a state of balance’ - i.e. a situation where there is no tendency for change. The concept is used in both microeconomics (e.g. equilibrium prices in a market) and also in macroeconomics (e.g. equilibrium national income).

the price at which there is no tednancy to change because demand is equal to supply

Health rationing

Health rationing occurs when the demand for health care services outstrips the available resources leading to waiting lists and delays for health treatment.

Shortage

A situation in which quantity demanded is greater than quantity supplied.

Incentive fucntion

when changes in price encourage buyers and sellers to change the quantity they buy and sell

Price mechanism

The means by which decisions of consumers and businesses interact to determine the allocation of resources. The free-market price mechanism clearly does NOT ensure an equitable distribution of resources and can lead to market failure.

signalling fucntion

when changes in price give infomration to buyers and sellers which infulence their decisions to buy and sell

Rationing fucntion

when changes in price lead to more or less being produced, so increaseing or limiting the quanity demanded by buyers

Signalling

Prices have a signalling function because the price in a market sends important information to producers and consumers.

Community surplus

Community surplus is the sum of consumer and producer surplus at a given market price and output. Community surplus is maximised in competitive markets at an equilibrium output when price

Consumer surplus

Consumer surplus is the difference between the total amount that consumers are willing and able to pay for a good or service (indicated by the demand curve) and the total they pay (the market price).

Producer surplus

The difference between what producers are willing and able to supply a good for and the price they actually receive

normal good

a good where quanitity demanded increases after a increase in income

inferior good

a good where quantity demanded decreases after a increase in income

subsitute goods

two goods are subsitute if the demand for good x rises after rise in the rpice in price of good y

complimentary good

2 goods are complimentary if the increase in price of one good causes demand for another good to fall

what are the factors that affect demand FIG POA

Fashion

Income

Goverment legislation

Population

Other good price

Adverstisement

Factors Affecting Supply WETCCOGG

Weather

Expectations for the future

Technology

Cartel of Producers

Cost of Production

Other Good Price

Goal of Sellers

Government Regulation

acronym for eval ERECTTTAL

Extent

Relative importance

Elasticity

Ceteris paribus

Time scale

Try to use more spesific economic terminology

Time lag

Alternatives

Limitation of Data