Basic Concepts Unit 2

All other factors equal, there is a negative relationship between the price of a good and the quantity of it demanded, meaning that when price increases consumers demand less of the good and when it decreases they buy more.

The claim that, other things equal, the quantity supplied of a good rises when the price of the good rises

a good that consumers demand more of when their incomes increase

Gasoline, housing, clothes, candy, jewelry (most goods are normal goods, either only that or in addition to something else.)

First price products (all low price chains), economy class tickets, second-hand clothes or other second-hand products, ramen noodles, bus tickets (depends)

a good that consumers demand less of when their incomes increase

Fanta and Solo, Coke and Pepsi, a degree from Oxford and the same degree from Cambridge, Apple and Samsung, McDonalds and Burger King

Products or services that satisfy the same or similar needs and can be used in place of each other.

The demand for substitute good B increases (and when A's price decreases, B's demand decreases)

Cars and gasoline, knives and forks, bow and arrow, device and charger, ski and poles, helmet and motorcycle, pencil and pencilcase

Products and services that are often used or bought together (you don't NEED both, but they work best together)

the assumption that nothing else is changing; all else being equal

Fact providing economics that describe, explain and predict the economy through methods, models and hypothesis

The unemployment rate is 5% (describe), if the price of strawberries increases the demand will go down (explain), the unemployment rate will go up next year (prediction)

The part of economics that focuses on what we think should happen or be done based on our morals and values, often focuses on politics and environment

Healthcare should be available and free for everyone (opinion)

What to produce? How to produce? For whom to produce?

Any kind of arrangement where buyers and sellers of a particular good, service, or resource are linked together to carry out an exchange.

A market in which there are many buyers and sellers of the same good or service, none of whom can influence the price at which the good or service is sold

The willingness and ability a consumer have to buy different quantities of a good at different prices, ceteris paribus

A graph of the relationship between the price of a good and the quantity demanded (does not have to be an actual curve)

The sum of all the individual demands for a particular good or service, often displayed through a demand curve

The unchanging variables that can influence demand other than price itself, ceteris paribus (causes a shift in the demand curve)

An increase (of demand/supply)

A decrease (of demand/supply)

Preferences and tastes (including trends), income of consumer (demand goes up for normal goods and down for inferior goods), prices of substitute goods (if one's price goes up, the other's demand goes up too), prices of complementary goods (if one's prices go up, both their demands go down), the number of consumers (how many are actually buying this?)

Is a change in quantity, caused by a change in price

Is a change of demand/supply and is caused by non-price determinants

The principle consumers experience diminishing additional satisfaction as they consume more of a good or service during a given period of time (partly explains the law of demand and the negative relationship between price and quantity demanded) The satisfaction consumers get from consuming more and more units of a good decreases.

The subjective satisfaction, usefulness, value or happiness the consumers gain from consuming something

the assumed measurement of utility for the purposes of discussing economics (however it does not actually exist)

The total satisfaction consumers gets from consuming a product

The additional satisfaction consumers get when they consume one more unit of a good (it falls the more you buy)

The total utility of the second product minus the total utility of the first product

Additional/extra

Purchasing power; it increases as prices fall and decreases as prices rise even if the income/amount of money remains the same

The income and substitution effects

Quantity demanded increases when prices fall because consumers buy more of the less-expensive products, therefore always a negative relationship between price and quantity demanded

The consumption changes because the real income changes (you can buy more for the same or less for the same)