2. Glossary

Question 1

Consumers

Answer 1

Individuals who buy goods and services for their own use.

Question 2

Price Mechanism

Answer 2

The means of allocating resources in a market economy

Question 3

Market

Answer 3

Where buyers and sellers get together to trade

Question 4

Demand

Answer 4

the quantity of a product that consumers are willing and able to buy at different prices per period of time other things equal, ceteris paribus.

Question 5

Supply

Answer 5

the quantity of a product that producers are willing and able to sell at different prices within a time period, other things equal, ceteris paribus.

Question 6

Supply chain

Answer 6

all the stages of a product’s progress from raw materials, production and distribution until it reaches the consumer.

Question 7

Notional demand

Answer 7

where buyers may want to buy a product but which is not always backed up by the ability to pay.

Question 8

Effective demand

Answer 8

demand that is supported by the ability to pay.

Question 9

Demand curve

Answer 9

line plotted on a graph that represents the relationship between the quantity demanded and the price of a product.

Question 10

Market demand

Answer 10

the total amount demanded by consumers.

Question 11

Demand schedule

Answer 11

the data from which a demand curve is drawn on a graph.

Question 12

Normal goods

Answer 12

where the quantity demanded increases as income increases.

Question 13

Inferior

Answer 13

where the quantity demanded increases as income decreases.

Question 14

Substitute

Answer 14

An alternative good

Question 15

Complement

Answer 15

A good consumed with another

Question 16

Joint demand

Answer 16

When two goods are consumed together

Question 17

Supply curve

Answer 17

line plotted on a graph that represents the relationship between the quantity supplied and the price of the product.

Question 18

Supply schedule

Answer 18

the data from which a supply curve is drawn on a graph.

Question 19

Subsidies

Answer 19

direct payments made by governments to producers of goods and services.

Question 20

Indirect tax

Answer 20

tax levied on goods and services, such as a general sales tax.

Question 21

Elasticity

Answer 21

numerical measure of responsiveness of one variable following a change in another variable, ceteris paribus or other things equal.

Question 22

Elastic

Answer 22

where the relative change in the quantity demanded is greater than the change in price, income or the prices of substitutes and complements.

Question 23

Inelastic

Answer 23

where the relative change in the quantity demanded is less than the change in price, income or the prices of substitutes and complements.

Question 24

Price elasticity of demand

Answer 24

measures of the responsiveness of the quantity demanded for a product following a change in the price of the product.

Question 25

Perfectly elastic

Answer 25

where all that is produced is sold at a given price.

Question 26

Perfectly inelastic

Answer 26

where a change in price has no effect on the quantity demanded.

Question 27

Unit elasticity

Answer 27

where the change in price is relatively the same as the change in quantity demanded.

Question 28

Income Elasticity of demand

Answer 28

measures the responsiveness of the quantity demanded for a product following a change in income.

Question 29

Necessity good

Answer 29

type of normal good with a YED that is close to zero.

Question 30

Superior good

Answer 30

A good with a YED greater than 1

Question 31

Cross elasticity of demand

Answer 31

measures the responsiveness of the quantity demanded for one product following a change in the price of another product.

Question 32

Price elasticity of supply

Answer 32

numerical measure of the responsiveness of the quantity supplied to a change in the price of the product.

Question 33

Equilibrium

Answer 33

situation where there is no tendency to change in a market.

Question 34

Disequilibrium

Answer 34

situation where demand and supply are not equal in a market.

Question 35

Equilibrium price

Answer 35

the price where demand and supply are equal, where the market clears.

Question 36

Changes in demand or supply

Answer 36

when there is a shift in the demand (supply) curve due to a change in factors other than the price of the product.

Question 37

Excise duties

Answer 37

a specific tax that is levied on goods such as cigarettes.

Question 38

Ad valorem tax

Answer 38

tax that is charged as a given percentage of the price.

Question 39

Derived demand

Answer 39

where the demand for a good or service depends upon the use that can be made from it.

Question 40

Joint supply

Answer 40

When two items are produced together

Question 41

Rationing

Answer 41

where a producer limits the supply ot products in the market to ensure the products remain exclusive.

Question 42

Signaling

Answer 42

where decisions taken by buyers or sellers are determined by price.

Question 43

Transmission of preferences

Answer 43

the automatic way in which the market allows the wants of consumers to be made known to producers.

Question 44

Incentive

Answer 44

where low or high prices influence consumption and production by encouraging buyers to consume and sellers to produce.

Question 45

Consumer surplus

Answer 45

the difference between the price a consumer is willing to pay for a product and its market price.

Question 46

Producer surplus

Answer 46

the difference between the price a producer is willing to accept and what is actually paid.