The difference between a movement and a shift in the demand curve lies in the causing factors. The first occurs due to changes in its price. The second occurs due to changes in non-price factors such as consumer income, future price
A downward-sloping demand curve holds true in most of our day-to-day cases. It shows a negative relationship between price and quantity demanded. It complies with the law of demand. By the law of demand, a higher price lowers consumers'
While it applies to most things we encounter daily, there are exceptions to the law of demand. Two of them are Veblen goods and Giffen goods. They show a positive relationship between their price and the quantity demanded by
The three reasons or assumptions underlying the law of demand are the income effect, the substitution effect, and diminishing marginal utility. The first two describe how consumers react when the price of a product changes. The income
What's it: Individual demand represents the quantity demanded by a person for a good at a given price level. Two conditions: he has the willingness to buy and has the ability to buy. At different price levels, the quantity demanded
This article will discuss the types of demand. What is a demand? Economists define it as the willingness and ability of consumers to buy goods at any given price. Willingness means we want things. Ability means we have the money
When we study demand theory, non-price determinants of demand refer to factors other than the price of the goods we study, where their changes can affect demand. Knowing them is important because they are not described from the model.
What's it: Social cost is private cost plus external cost. Private cost is borne by individuals directly involved in economic transactions or activities. Meanwhile, the external cost is borne by third parties not directly involved in
What's it: Free rider is someone who gets benefit from a product at no cost. It appears in the public good because people are free to benefit from the goods without paying. When you consume it, it does not reduce the benefits received
What's it: Excess capacity is where production capacity is not fully utilized to achieve the minimum efficient scale. In other words, the firm produces at a lower output scale than it was designed for. Not only companies but this term
What's it: Individual supply refers to the number of goods a firm is willing and able to produce at a given price, ceteris paribus. It only represents supply from one producer. When you combine all the firms' production in the market,
What's it: Arc elasticity is a measure of elasticity based on two given points. Suppose you measure the own-price elasticity of demand. In that case, it is the percentage change in quantity demanded divided by the percentage change in
What's it: First-degree price discrimination is a type of price discrimination in which producers charge each customer the highest price they are willing and able to pay. We also call this perfect price discrimination. Types of
What's it: Total variable cost is the sum of all variable costs. Suppose you have data on variable costs per unit. In that case, you can calculate this by multiplying by the quantity to get the total variable cost figure. Variable
What's it: An auction is a selling method where prices have not yet been set and are determined through an open and competitive bidding process. The auctioneer acts as the selling agent in most cases and receives a commission on the
What's it: Elasticity of demand measures the responsiveness of a product's demand to changes in determining factors such as its price (own-price), the price of other goods, and income. To calculate this, you divide the percentage