| Term | Definition |
|---|
| Consumer | a person who buys a finished good or service to satisfy their needs and wants |
| Individual demand | the quantity of a commodity a consumer is both willing and able to buy at different prices |
| Demand schedule | a table showing the quantities of a commodity a consumer is willing and able to pay for over a series of prices |
| Demand curve | slopes downwards to the right, the curve is negatively sloped because of the law of demand |
| Law of demand | as the price of a commodity increases the quantity demanded will fall, ceteris paribus |
| Ceteris paribus | latin term meaning 'all other factors remain unchanged' |
| Movement along demand curve | Caused by a change in price |
| Shifts of demand curve | Caused by a factor other than price |
| Changes in income | will cause disposable income to increase and an increase in demand and shift the demand curve to the right |
| Normal goods | an increase in income will result in an increase in demand such as necessities and luxuries |
| Inferior goods | an increase in income will result in a decrease in demand such as lower quality and cheaper goods |
| Changes in tastes and preferences | A change in tastes and preferences will change quantity demanded |
| Changes in the price of substitute goods | Substitute goods can be used in place of each other, increase in price of one will lead to increase in QD of other |
| Changes in the price of complementary goods | Complementary goods are consumed with another good, if price of one increases then QD will decrease of other good such as cars and petrol |
| Consumers expectations of the future | What consumers think will happen in the future and will affect demand |
| Number of consumers in population | As population grows the demand for goods or services will increase |
| Market demand | the horizontal summation of all the individuals demand in the market at each price |
| Market demand curve | quantities that will be bought by all consumers of a commodity in the market at each price |
| Utility | numerical measure of the level of satisfaction gained by a consumer when they consume a commodity |
| Total utility | the sum of all utility |
| Marginal utility | the extra satisfaction gained from consuming an extra unit of a good or service |
| Law of diminishing marginal utility | successive quantities of a good consumed will generate smaller amounts of extra utility |
| Optimum purchase rule | to maximise utility, consumers should purchase more of a good up where price equals marginal utility as once price exceeds marginal utility the price paid would be higher than the satisfaction gained from consuming it |
| Consumer equilibrium | where the ratios of marginal utility per dollar for all goods purchased are equal and with a limited amount to spend should make choices that maximise total utility |
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