Ag. Econ. Chapter 4 Terms

Income Effect

Decrease (increase) in the price of a product means the consumer can afford to buy more (less) of the product.

Change in Quantity Demanded

Refers to the change in the quantity observed on the horizontal axis associated with a movement up or down the demand curve as opposed to a shift in the demand curve.

Inferior Good

Rise in income lead to a leftward shift in demand curve.

Tastes and Preferences

These factors along with prices, incomes, and wealth, influence the demand for a particular good or service.

Market Demand Curve

This curve along with the supply curve determines the equilibrium price for a given commodity or service.

Consumer Surplus

A measure of the savings acheived by consumers at the current market price from the price they would have been willing to pay for a specific quanity of a good or service.

Normal Good or Luxury

A rise in income leads to a rightward shift in the demand curve.

Demand Curve

A schedule that shows how many units of a good the consumer will purchase at different prices for that good during some specified time and a specified market, all other factors held constant.

Change in Demand

A shift in the demand curve generally caused by changes in the prices of compliments or substitutes, income, and tastes and preferences.

Inferrior Goods

Goods for which consumption falls (rises) when income increases (decreases).

Normal Goods

Goods for which consumption rises (falls) when income increases (decreases).

Substitution Effect

Substitution of a product for another because the price of the former has declined or increases.

Ceteris Paribus

The assumption that all factors that might affect demand are held constant, during the time period. The latin phrase most commonly used by economists.

Price Consumption Curve

The connection or locus of all tangency points between budget lines and indifference curves.

Consumer Equilibrium

The consumption bundle that maximized total utility and is feasible as defined by the budget constraint.

Engel Curve

The schedule that shows how many units of a good the consumer will purchase at difference income levels, all other factors held constant.