The Allocation of Resources Flashcards
Complimentary goods
goods that are purchased to support the consumption of another good
Contraction in demand
Movement along the demand towards the left that shows an increase in price but a decrease in the quantity of goods demanded
Contraction in supply
movement along the supply curve towards the left that indicates a fall in the price of a product and a fall in the quantity the producers are willing to supply
Demand
The quantity of goods that the consumers are willing and able to buy in a particular period of time at a particular price
Diminishing marginal utility
Consumption of additional units of a product that reduces the satisfaction each time the product is consumed
Elasticity
the responsiveness of quantity supplied or demanded to a change in the price of the good
Equilibrium
A point where the demand curve intersects with the supply curve
Excess demand
Quantity demanded in more than the quantity supplied
Excess supply
Quantity supplied is more than the quantity demanded
Extension in demand
a movement along the demand curve where the price decreases and the quantity demanded increases
External costs
cost of production that have to paid by someone other than the firm or the individual responsible for the harm
External beneifts
benefit due to the production of a good or service that benefit someone other than the firm or the indidual
Individual demand
the quantity of a good an individual would be willing and able to buy at a particular price during a period of time
Inferior goods
These goods whose demand decreases as the income of the consumer increases
Marginal utility
the additional satisfaction gained from the consumption of an extra unit of a product.
Market demand
the summation of all individual demand that gives the market demand for a product
Price Elastic Demand
a % change in price results in greater % change in quantity demanded.
Price inelastic demand:
a % change in price results in smaller % change in quantity demanded.
Price elastic supply:
a % change in price results in greater % change in quantity supplied.
Price inelastic supply:
a % change in price results in smaller % change in quantity supplied.
Private costs
the costs that a company or individual has to pay for production
Private benefit
the benefit experienced by an individual or a company after production normally the profits earned
Social costs
private costs + external costs
Social benefits
Private benefits + external benefits
Substitute good
good that can be used as an alternative for another good
Supply
the quantity of goods a producer is willing and able to supply at a particular price during a period of time
Unitary elasticity
% change in price results equal % change in quantity demanded or supplied.
Utility
the satisfaction gained by consuming a product
