 DEMAND
Is the quantity of a good or service  UTILITY FUNCTION
that customers are willing and able
to purchase during a specified period
under a given set of economic
conditions.
Total quantity customers are willing
and able to purchase under various
market conditions.
 SUPPLY
Total quantity offered for sale under
various market conditions.
 SUPPLY DERIVED DEMAND
Demand for inputs used in
production.
 SURPLUS
Is created when producers supply
more of a product at a given price
than buyers demand. Describes a
condition of excess supply.
 FIRM DEMAND
Has reference to the demand for the
product of a particular firm which is
part of the industry.
 INDUSTRY DEMAND
Has reference to the total demand
for the products of a particular
industry. E.g. the demand for
textiles.
 SHORTAGE
Is created when buyers demand
more of a product at a given price
than producers are willing to supply.
Excess demand.
 EQUILIBRIUM
Perfect balance in demand and
supply.
 UTILITY THEORY
The ability of goods and services to
satisfy consumer wants is the basis
for consumer demand.
Is a descriptive statement that
relates satisfaction or well-being to
the consumption of goods and
services.
 MARGINAL UTILITY
Measures the added satisfaction
derived from a 1-unit increase in
consumption.
 INDIFFERENCE CURVES
Representation of all market baskets
provide a given consumer the same
amount of utility or satisfaction.
 SUSTITUTES
Products that serve the same
purpose.
 COMPLEMENTS
Products that are best consumed
together.
 BUDGET CONSTRAINT
Represents all combinations of
products that can be purchased for a
fixed amount.
 INCOME EFFECT
Increase in overall consumption
made possible by a price cut, or
decrease in overall consumption that
follows a price increase.
 SUBSTITUTION EFFECT
Change in relative consumption that
occurs as consumers substitute
cheaper products for more
expensive products.
 ENGLE CURVE
A plot of the relationship between
income and the quantity consumed
of a good or service.
 NORMAL GOODS
Goods and services with rising
consumption at higher levels of
income.
 INFERIOR GOODS
Goods and services with falling
consumption at higher levels of
income.
 ELASTICITY
The percentage change in
dependent variable, Y resulting from
a 1 percent change in the value of an
independent variable.
 ENDOGENOUS VARIABLES
Factors such as price and
advertising that are within the control
of the firm.
 EXOGENOUS VARIABLES
Factors outside the control of the
firm, such as consumer income,
competition prices and the weather.
 POINT ELASTICITY
It measures elasticity at a given point
on a function.
 PRICE ELASTICITY OF DEMAND
Responsiveness of quantity
demanded changes in the price of
the product itself., holding constant
the values of all other variables in
the demand function.
 ELASTIC DEMAND
Situation in which a price change
leads to a more than a proportionate
change in quantity demanded.
 UNITARY ELASTICITY
Situation in which price and quantity
changes exactly offset each other.
 INELASTIC DEMAND
Situation in which a price change
leads to a less than proportionate
change in quantity demanded.
 COUNTERCYCLICAL
Falls with rising income, and rises
with falling income.
 NON CYCLICAL NORMAL GODS
Products for which demand, is
relatively unaffected by changing
income.
 CYCLICAL NORMAL GOODS
Products for which demand is
strongly affected by changing
income.
 LAW OF DIMINISHING MARGINAL
UTILITY
States that as an individual
increases consumption of a given
product within a set period of time,
the marginal utility gained from
consumption eventually declines.
 REGRESSION ANALYSIS
Is a powerful statistical technique
used to describe the ways in which
important economic variables are
related.
 STATISTICAL RELATION
Exist between two economic
variables if the average of one is
related to another, but it is
impossible to predict with certainty
the value of one based on the value
of another.
 TWO-TAIL T TEST
Hypothesis tests that relate to
matters of effect or influence of the
dependent variables.
 ONE TAIL T TEST
Tests of direction (positive or
negative) or comparative magnitude.
 F STATISTIC
Offers evidence on the statistical
significance of the proportion of
dependent variable variation that has
been explained.
 T STATISTIC
Is a test statistic that has an
approximately normal distribution
with a mean of zero and standard
deviation of 1.
 MARGINAL REVENUE PRODUCT
Amount of revenue generated by
employing the last input unit.
 OUTPUT ELASTICITY
Percentage change in output
associated with a 1 percent change
in all input.
 PRODUCTION FUNCTION
Specifies the maximum output that
can be produced for a given amount
of input. Relationship between inputs
and the maximum amount that can
be produced within a given period of
time with a given level of technology.
 RETURN TO SCALE
Output effect of a proportional
increase in all inputs.
 MARGINAL PRODUCT
Change in output associated with a
1-unit change in a single input.
 AVERAGE PRODUCT
Quantity of total output produced per
unit of a variable input, holding all
other inputs fixed.
 MARGINAL RATE OF TECHNICAL
SUBSTITUTION
Amount of one input that must be
substituted for another to maintain
constant output.
 POWER PRODUCTION
FUNCTIONS EXPANSION PATH
Shows efficient input combination as
output grows.