| A | B |
|---|
| Price elasticity of demand | The responsiveness of quantity demanded to a change in price. |
| Formula for price elasticity of demand | The percentage change in quantity demanded divided by the percentage change in price. |
| Elastic demand | Where quantity demanded changes by a larger percentage than price. Ignoring the negative sign it will have a value greater than 1. |
| Inelastic demand | Where quantity demanded changes by a smaller percentage than price. Ignoring the negative sign it will have a value less than 1. |
| Unit elastic demand | Where quantity demanded changes by the same percentage as price. Ignoring the negative sign it will have a value equal to 1. |
| Total consumer expenditure | The price of the product multiplied by the quantity purchased. |
| Total revenue | The total amount received by firms from the sale of a product. Price multiplied by quantity. |
| Income elasticity of demand | The responsiveness of demand to a change in consumer incomes. |
| Formula for income elasticity of demand | The percentage change in demand divided by the percentage change in income. |
| Normal goods | Goods whose demand increases as consumer incomes increase. They have a positive income elasticity of demand. |
| Luxury goods | These are a type of normal good but will have a higher income elasticity of demand than more basic goods. |
| Cross-price elasticity of demand | The responsiveness of demand for one good to a change in the price of another. |
| Formula for cross-price elasticity | The percentage change in demand for Good A divided by the percentage change in price of Good B. |
| Centrally planned or command economy | An economy where all the decisions are taken by the central authorities. |
| Free-market economy | An economy where all economic decisions are taken by individual households and firms with no government intervention. |
| Mixed economy | An economy where economic decisions are made partly by the government and partly through the market. There is both a private sector and a public sector. |
| Mixed market economy | A market where there is some government intervention. |
| The price mechanism | The system whereby price changes that occur in response to changes in demand and supply have the effect of making demand equal to supply. |
| Perfect competition | A situation where the consumers and producers of a product are price takers. |
| Price taker | A person or firm with no power to be able to influence the market price. |
| The law of demand | The quantity of a good demanded per period of time will fall as price rises and will rise as price falls other things being equal. |
| Income effect | The effect of a change in price on quantity demanded arising from the consumer becoming better or worse off as a result of the price change. |
| Substitution effect | The effect of a change in price on quantity demanded arising from the consumer switching to or from alternative (substitute) products. |
| Quantity demanded | The amount of a good that a consumer is willing and able to buy at a given price over a given period of time. |
| Demand schedule for an individual | A table showing the different quantities of a good that a person is willing and able to buy at various prices over a given period of time. |
| Market demand schedule | A table showing the different quantities of a good that consumers are willing and able to buy at various prices over a given period of time. |
| Demand curve | A graph showing the relationship between the price of a good and the quantity of the good demand over a given time period. |
| Substitute goods | A pair of goods which are considered by consumers to be alternatives to each other. As the price of one goes up the demand for the other rises. |
| Complementary goods | A pair of goods consumed together. As the price of one goes up |
| Normal good | A good whose demand rises as people’s income rise. |
| Inferior good | A good whose demand falls as people’s incomes rise. |
| Ceteris paribus | Latin for other things being equal. This assumption has to be made when making deductions from theories. |
| Change in demand | The term used for a shift in the demand curve. It occurs when a determinant of demand other than price changes. |
| Change in the quantity demanded | The term used for a movement along the demand curve to a new point. It occurs when there is a change in price. |
| Principle of diminishing marginal utility | As more units of a good are consumed additional units will provide less additional satisfaction than previous units. |
| Marginal utility | The extra satisfaction gained from consuming one extra unit of a good within a given time period. |
| Supply schedule | A table showing the different quantities of a good that producers are willing and able to supply at various prices over a given time period. |
| Supply curve | A graph showing the relationship between the price of a good and the quantity of the good supplied over a specified period of time. |
| Substitutes in supply | These are two goods where an increased production of one means diverting resources away from producing the other. |
| Goods in joint supply | These are two goods where the production of more of one leads to the production of more of the other. |
| Change in the quantity supplied | The term used for a movement along the supply curve to a new point. It occurs when there is a change in price. |
| Change in supply | The term used for a shift in the supply curve. It occurs when a determinant other than price changes. |
| Market clearing | A market clears when supply matches demand |
| Equilibrium price | The price where the quantity demanded equals the quantity supplied. The price where there is no shortage or surplus. |
| Equilibrium | A position of balance. A position from which there is no inherent tendency to move away. |
| Relative Price | The price of one good compared with another e.g. Good X is twice the price of good Y. |
