In economics, supply represents the quantity that producers are willing and able to supply at a certain price. That is a fundamental economic concept besides demand.Producers exist to meet consumer demand. If the individual motive is satisfaction
Microeconomics
Inverse Demand Function: Unveiling the Hidden Price-Quantity Relationship
The inverse demand function is a powerful economic tool that illuminates the relationship between a product's price and the quantity demanded by consumers. Unlike the traditional demand function, which focuses on how price influences buying behavior,
Concentration Ratio: Meaning, Formula, How to Calculate, Pros, Cons
Concentration ratio (CR) measures the market dominance of the largest companies. We calculate this by adding up the market share of the largest N-companies.In general, this ratio tells us the market concentration on big companies. Although the
Consumer Choice Theory: Rationale and Axioms
Consumer choice theory links the consumer demand curve with consumer preferences. This theory views that consumers fully understand what they choose.The rationale behind consumer choice theoryWhen dealing with several consumption bundles,
Utility Function: Why It Matters, How It Works
Utility function is a mathematical representation of the satisfaction (utility) of consumption of a basket of goods. The function translates each bundle of products and services into an unit (utils).Why is the utility function important?The
Substitute Goods: Meaning, Elasticity, Examples
Substitute goods refer to two or more goods that meet similar needs, so they become alternatives to each other. For example, Coca-Cola is a close substitute for Pepsi. Because it is an alternative, consumers switch to their substitutes when
Consumption bundle
Consumption bundle represents a basket of combinations of goods and services that people want to consume. Economists use a basket of products to explain the concept of utility. Two baskets are two different bundles because the quantity of one item is
Supply function
The supply function is a mathematical equation that connects the quantity of supply of a good with its determining factors. Determinants include its own price, wages, energy costs, raw material prices, taxes, the selling price expectation, subsidies,
Substitution Effect: Meaning, Impacts, Types of Goods
The substitution effect is a change in consumption patterns due to changes in the relative prices of goods and services. Consumers replace more expensive products with cheaper ones. So, if the price of a product rises, consumers switch and increase
Complementary Goods: Meaning, Elasticity
Complementary goods refer to two or more items that are usually consumed simultaneously. Examples are cars and gasoline. We need gasoline as fuel to drive the vehicle.Complementary products may be part of other items such as a motorcycle and tire
Utility: Meaning, Types
Utility refers to the satisfaction or value that consumers get from consuming goods or services. Economists call the satisfaction of want as a utility. It represents a measure of relative contentment. The concept is essential in explaining the law of
Income Effect: Meaning, Implications
The income effect measures the impact of changes in purchasing power on demand. It can be positive or negative.We measure the purchasing power of consumers from real income, namely nominal income, after adjusting for the price of the goods. It is