Demand

Microeconomics category

• Utility: satisfaction gained
• Total Utility: all satisfaction gained
• Marginal Utility: additional satisfaction
• Law of Diminishing Marginal Utility: (LDMU) as consumers consume additional units of a good, their marginal utility will eventually decrease.
• Assumptions regarding LDMU: after origin, no time lapse, no change in income, not addictive/medicinal good.
• Law of Equimarginal Returns: in order to enjoy maximum utility, a rational consumer will spend his/her income in a way the the ratio of marginal utility is the same for all goods bought.
• Economic good: Demands a price, utility and is transferable
• Assumptions of consumer behaviour: is rational, has a limited income, aims for maximum utility, is subject to LDMU.
• Individual Demand: demand of one person
• Market Demand: demand of all people
• Demand schedule: table showing demand
• Demand curve: graph showing demand, as taken from demand schedule
• Law of Demand: Price down, Demand up. Price up, Demand Down.
• Perverse Demand Curve: Snob goods; Giffen goods; goods subject to expectations; goods of addiction.
• Income Effect: Price down, Income up.
• Substitution Effect: Price down, Marginal utility up
• Normal good: if Income up, Demand up.
• Inferior good: if Income up, Demand down.
• Determinants of Demand: Price; Price of other good; Income; Tastes; Unplanned Factors; Government Regulations; Consumer Expectations.
• Consumer Surplus: Price paid vs Price willing to pay
• Paradox of Value: Diamond has high price, little use; Water has low price, many uses.