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Economics is the social science that studies the production, distribution, and consumption of goods and services.
Microeconomics is a branch of economics that studies the behavior of individuals and firms in making decisions regarding the allocation of scarce resources and the interactions among these individuals and firms.
In microeconomics, supply and demand is an economic model of price determination in a market. It is a law and it is testable. It postulates that, holding all else equal, in a competitive market, the unit price for a particular good, or other traded item such as labor or liquid financial assets, will vary until it settles at a point where the quantity demanded will equal the quantity supplied, resulting in an economic equilibrium for price and quantity transacted.
A tax is a compulsory financial charge or some other type of levy imposed upon a taxpayer by a governmental organization in order to fund government spending and various public expenditures. A failure to pay, along with evasion of or resistance to taxation, is punishable by law. Taxes consist of direct or indirect taxes and may be paid in money or as its labour equivalent. The first known taxation took place in Ancient Egypt around 3000–2800 BC.
In economics, an indifference curve connects points on a graph representing different quantities of two goods, points between which a consumer is indifferent. That is, any combinations of two products indicated by the curve will provide the consumer with equal levels of utility, and the consumer has no preference for one combination or bundle of goods over a different combination on the same curve. One can also refer to each point on the indifference curve as rendering the same level of utility (satisfaction) for the consumer. In other words, an indifference curve is the locus of various points showing different combinations of two goods providing equal utility to the consumer. Utility is then a device to represent preferences rather than something from which preferences come. The main use of indifference curves is in the representation of potentially observable demand patterns for individual consumers over commodity bundles.
In economics, elasticity is the measurement of the percentage change of one economic variable in response to a change in another.
Conspicuous consumption is the spending of money on and the acquiring of luxury goods and services to publicly display economic power of the income or of the accumulated wealth of the buyer. To the conspicuous consumer, such a public display of discretionary economic power is a means of either attaining or maintaining a given social status.
Price elasticity of demand (Epd), or elasticity, is the degree to which the effective desire for something changes as its price changes. In general, people desire things less as those things become more expensive. However, for some products, the customer's desire could drop sharply even with a little price increase, and for other products, it could stay almost the same even with a big price increase. Economists use the term elasticity to denote this sensitivity to price increases. More precisely, price elasticity gives the percentage change in quantity demanded when there is a one percent increase in price, holding everything else constant.
The theory of consumer choice is the branch of microeconomics that relates preferences to consumption expenditures and to consumer demand curves. It analyzes how consumers maximize the desirability of their consumption as measured by their preferences subject to limitations on their expenditures, by maximizing utility subject to a consumer budget constraint.
In economics, a budget constraint represents all the combinations of goods and services that a consumer may purchase given current prices within his or her given income. Consumer theory uses the concepts of a budget constraint and a preference map to analyze consumer choices. Both concepts have a ready graphical representation in the two-good case.
In economics and consumer theory, a Giffen good is a product that people consume more of as the price rises and vice versa—violating the basic law of demand in micro economics. For any other sort of good, as the price of the good rises, the substitution effect makes consumers purchase less of it, and more of substitute goods; for most goods, the income effect reinforces this decline in demand for the good. But a Giffen good is so strongly an inferior good in the minds of consumers that this contrary income effect more than offsets the substitution effect, and the net effect of the good's price rise is to increase demand for it. Also known as Giffen Paradox. A Giffen good is considered to be the opposite of an ordinary good.
In economics, an inferior good is a good whose demand decreases when consumer income rises, unlike normal goods, for which the opposite is observed. Normal goods are those goods for which the demand rises as consumer income rises.
In economics, a normal good is any good for which demand increases when income increases, i.e. with a positive income elasticity of demand.
In economics and particularly in consumer choice theory, the income-consumption curve is a curve in a graph in which the quantities of two goods are plotted on the two axes; the curve is the locus of points showing the consumption bundles chosen at each of various levels of income.
In economics, goods are items that satisfy human wants and provide utility, for example, to a consumer making a purchase of a satisfying product. A common distinction is made between goods which are transferable, and services, which are not transferable.
In economics, a demand curve is a graph depicting the relationship between the price of a certain commodity and the quantity of that commodity that is demanded at that price. Demand curves may be used to model the price-quantity relationship for an individual consumer, or more commonly for all consumers in a particular market. It is generally assumed that demand curves are downward-sloping, as shown in the adjacent image. This is because of the law of demand: for most goods, the quantity demanded will decrease in response to an increase in price, and will increase in response to a decrease in price.
Superior goods or luxury goods make up a larger proportion of consumption as income rises, and therefore are a type of normal goods in consumer theory. Such a good must possess two economic characteristics: it must be scarce, and, along with that, it must have a high price. The scarcity of the good can be natural or artificial; however, the general population must recognize the good as distinguishably better. Possession of such a good usually signifies "superiority" in resources, and usually is accompanied by prestige.
In economics, demand is the quantity of a that consumers are willing and able to purchase at various prices during a given period of time.
In economics, a demerit good is "a good or service whose consumption is considered unhealthy, degrading, or otherwise socially undesirable due to the perceived negative effects on the consumers themselves". It is over-consumed if left to market forces. Examples of demerit goods include tobacco, alcoholic beverages, recreational drugs, gambling, junk food and prostitution. Because of the nature of these goods, governments often levy taxes on these goods, in some cases regulating or banning consumption or advertisement of these goods.
In economics, a necessity good or a necessary good is a type of normal good. Necessity goods are products and services that consumers will buy regardless of the changes in their income levels, therefore making these products less sensitive to income change. Examples include repetitive purchases of different durations such as haircuts, habits including tobacco, everday essentials such as electricity and water, and critical medicine such as insulin. As for any other normal good, an income rise will lead to a rise in demand, but the increase for a necessity good is less than proportional to the rise in income, so the proportion of expenditure on these goods falls as income rises. If income elasticity of demand is lower than unity, it is a necessity good. This observation for food, known as Engel's law, states that as income rises, the proportion of income spent on food falls, even if absolute expenditure on food rises. This makes the income elasticity of demand for food between zero and one.
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