Definitions Flashcards
Effective demand
Willingness to buy , backed up by the ability to pay
Demand
Quantity of a good or a service that people are willing to buy at a given price in a given period of time
Law of demand
An increase in price will lead to a fall in quantity demand , a fall in price will lead to an increase in quantity demanded
Demand curve
Graphical representation of relationship between price + quantity demanded , is usually downward slopping due to law of demand
Diminishing marginal utility
Consumption of an additional unit of a good yields less utility than the consumption of the previous unit
Extension of demand
Reduction of price leads will cause quantity demand to be higher
Contraction of demand
Increase in price will cause quantity in demand to be lower
Market
Place where buyers and sellers come together to to trade
Marginal utility
One extra
Total utility
Satisfaction
Market equilibrium
Where demand for and supply are equal such that there is no tendency for price and quantity to change
Market clearing price
Price at which nobody wishes to buy or sell
Northern excess demand or supply
Excess demand
Current price below equilibrium
Excess supply
Current price over equilibrium price
