Glossary
Complements
Goods that are typically consumed together; an increase in the price of one will decrease the demand for the other.
Example:
If the price of hot dogs goes up, people might buy fewer hot dog buns, as buns are a complement to hot dogs.
Demand
The willingness and ability of consumers to purchase a good or service at various prices over a given period.
Example:
Even if everyone wants a private jet, only those demanding it are both willing and able to afford its high price.
Determinants of Demand
Non-price factors that cause the entire demand curve to shift, indicating a change in the overall willingness and ability to buy a good at every price.
Example:
A sudden trend for vintage clothing is one of the Determinants of Demand that would cause the demand curve for such items to shift right.
Expectations of Future Price
Consumers' beliefs about what the price of a good will be in the future, which can influence current demand.
Example:
If consumers expect the price of gasoline to rise next week, they might fill up their tanks today, demonstrating the impact of Expectations of Future Price.
Inferior Goods
Goods for which demand decreases as consumer income increases, and increases as consumer income decreases.
Example:
Instant noodles might be considered Inferior Goods because as people's incomes rise, they often opt for more expensive, higher-quality food options.
Law of Demand
An economic principle stating that, all else being equal, as the price of a good or service increases, its quantity demanded decreases, and vice versa.
Example:
When the price of concert tickets for a popular band soared, fewer people were willing to buy them, illustrating the Law of Demand.
Movement along the demand curve
A change in the quantity demanded of a good that results solely from a change in its own price, represented as a shift from one point to another on the same demand curve.
Example:
When a coffee shop lowers the price of its lattes, there's a movement along the demand curve to a higher quantity demanded, not a shift of the entire curve.
Normal Goods
Goods for which demand increases as consumer income increases, and decreases as consumer income decreases.
Example:
As people earn more, they tend to buy more expensive cars or gourmet food, making these Normal Goods.
Number of Buyers/Consumers
The total count of potential purchasers in a market; an increase in this number typically leads to an increase in demand.
Example:
If a new housing development brings thousands of new residents to a town, the Number of Buyers/Consumers for local services like restaurants will increase.
Quantity Demanded
The specific amount of a good or service that consumers are willing and able to buy at a particular price point.
Example:
If a new video game costs 30, the quantity demanded would likely increase.
Shift of the demand curve
A change in the entire demand relationship, caused by a change in one of the determinants of demand, leading to a new demand curve.
Example:
If a celebrity endorses a new brand of sneakers, it could cause a shift of the demand curve to the right, meaning more sneakers are demanded at every price.
Substitutes
Goods that can be used in place of one another; an increase in the price of one will increase the demand for the other.
Example:
If the price of Netflix subscriptions rises significantly, some consumers might switch to Hulu, making Hulu a substitute for Netflix.
Tastes and Preferences
Changes in consumer desires, trends, or attitudes towards a good or service that can affect its demand.
Example:
A new health study promoting the benefits of avocados would increase the demand for them due to a change in Tastes and Preferences.