Supply And Demand Definitions

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SUPPLY

Back 1

the quantity of a product that producers are willing and able to provide at different market prices over a period of time.

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DEMAND

Back 2

the quantity of a product that consumers are able and willing to purchase at various prices over a period of time.

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COMMAND ECONOMY

Back 3

an economic system in which most resources are state owned and also allocated centrally.

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MIXED ECONOMY

Back 4

an economic system in which resources are allocated through a mixture of the market and direct public sector involvement.

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MARKET

Back 5

where or when buyers and sellers meet to trade or exchange products.

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SUB-MARKET

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a recognised or distinguishable part of a market. Also known as a market segment.

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NOTIONAL DEMAND

Back 7

the desire for a product.

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EFFECTIVE DEMAND

Back 8

the willingness and ability to buy a product.

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CETERIS PARIBUS

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(Latin: other things being equal: assuming other variables remain unchanged.

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DEMAND CURVE

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this shows the relationship between the quantity demanded and the price of a product.

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DEMAND SCHEDULE

Back 11

the data that is used to draw the demand curve for a product.

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MOVEMENT ALONG THE DEMAND CURVE

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this is in response to a change in the price of a product.

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CONSUMER SURPLUS

Back 13

the extra amount that a consumer is willing to pay for a product above the price that is actually paid.

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DISPOSABLE INCOME

Back 14

income after taxes on income have been deducted and state benefits have been added.

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REAL DISPOSABLE INCOME

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income after taxes on income have been deducted and state benefits have been added and the result has been adjusted to take into account changes in the price level.

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NORMAL GOODS

Back 17

goods for which an increase in income leads to an increase in demand.

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SUPERIOR GOODS

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one for which the income elasticity of demand is positive, and greater than 1, such that as income rises, consumers spend proportionately more on the good

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INFERIOR GOODS

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goods for which an increase in income leads to a fall in demand.

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SUBSTITUTES

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competing goods that have a positive cross elasticity of demand.

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COMPLEMENTS

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goods for which there is joint demand. These goods will have a negative cross elasticity of demand.

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CHANGE IN DEMAND

Back 22

this is where a change in a non-price factor leads to an increase or decrease in demand for a product.

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PROFIT

Back 23

the difference between the total revenue (sales revenue) of a producers and total cost.

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SUPPLY CURVE

Back 24

this shows the relationship between the quantity supplied and the price of a product.

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SUPPLY SCHEDULE

Back 25

the data used to draw up the supply curve of a product.

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PRODUCER SURPLUS

Back 26

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

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CHANGE IN SUPPLY

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occurs when a change in a non-price influence leads to an increase or decrease in the willingness of a producer to supply a product.

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PRICE

Back 28

the amount of money that is paid for a given amount of a particular good or service.

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EQUILIBRIUM PRICE

Back 29

the price where demand and supply are equal.

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CLEARING PRICE

Back 30

the price where demand and supply are equal.

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EQUILIBRIUM QUANTITY

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the quantity that is demanded and supplied at the equilibrium price.

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DISEQUILIBRIUM

Back 32

a position in the market where demand and supply are not equal.

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SURPLUS

Back 33

an excess of supply over demand.

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SHORTAGE

Back 34

an excess of demand over supply.

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ELASTICITY

Back 35

the extent to which buyers and sellers respond to a change in market conditions.

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PED

Back 36

the responsiveness of the quantity demanded to a change in the price of the product.

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PRICE ELASTIC

Back 37

where the percentage change in the quantity demanded is sensitive to a change in price.

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PRICE INELASTIC

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where the percentage change in the quantity demanded is insensitive to a change in price.

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INCOME ELASTICITY OF DEMAND

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the responsiveness of demand to a change in income.

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NORMAL GOODS

Back 40

goods with a positive income elasticity of demand.

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INCOME INELASTIC

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goods for which a change in income produces a less than proportionate change in demand.

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INCOME ELASTIC

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goods for which a change in income produces a greater proportionate change in demand.

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INFERIOR GOODS

Back 43

goods for which an increase in income leads to a fall in demand.

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XED

Back 44

the responsiveness of demand for one product in relation to a change in the price of another product.

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PES

Back 45

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

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EFFICIENCY

Back 46

where the best use of resources is made for the benefit of consumers.

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ECONOMIC EFFICIENCY

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where both allocative and productive efficiency are achieved.

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ALLOCATIVE EFFICIENCY

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where consumer satisfaction is maximised.

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PARETO OPTIMUM

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an allocation of resourses is sadi to be a Pareto optimum if no reallocation of resources can make an individual better off without making some other individual worse off.

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TOTAL COSTS

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the sum of all costs that are incurred in producing a given level of output.

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AVERAGE TOTAL COSTS

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total cost divided by the quantity produced.

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MARGINAL COST

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the cost of producing an additional unit of output.

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FIXED COST

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costs incurred by a firm that do not vary with the level of output.

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SUNK COSTS

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costs incurred by a firm that cannot be recovered if the firm ceases trading .

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VARIABLE COST

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costs that vary with the level of output .

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ECONOMIES OF SCALE

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occur for a firm when an increase in the scale of production leads to production at lower long-run average cost.

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INTERNAL ECONOMIES OF SCALE

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economies of scale that arise from the expansion of a firm.

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EXTERNAL ECONOMIES OF SCALE

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economies of scale that arise from the expansion of the industry in which a firm is operating.

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INTERNAL DISECONOMIES OF SCALE

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diseconomies of scale that arise from the expansion of a firm.

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EXTERNA DISECONOMIES OF SCALE

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diseconomies of scale that arise from the expansion of the industry in which a firm is operating.

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TECHNICAL EFFICIENCY

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attaining the maximum possible output from a given set of inputs.

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COST EFFICIENCY

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the appropriate combination of inputs of factors of production, given the relative prices of those factors.