Glossary of 12 Important Concepts for Economics

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Quantity Demand - a concept that describes the amount of a good or service that a consumer is willing and able to buy at each particular price during a given period of time.
People need gas to operate their vehicles. They need it badly so there is a lot of demand for it.
Income Effect - any increase or decrease in consumers' purchasing power caused by a change in price.
People decide to stop buying gas because it is too expensive. Instead, they take public transportation.
Substitution Effect - the tendency of consumers to substitute a similar, low priced product for another product that is relatively more expensive.
A person goes grocery shopping and buys the store's brand instead of the regular brand.
Complementary Goods - goods that are commonly used with other goods.
Buying a mattress and sheets.
Substitute Goods - goods that can be used to replace the purchase of similar goods when price rises.
People buying margarine when the price of butter increases.
Total Revenue - the total income that a business recieves from selling its products.
People start buying more computers so Dell makes more money.
Elastic Demand - when a small change in a good's price causes a major, opposite change in the quantity demanded.
The price of gas goes down so people scramble to get as much of it as they can while it's cheaper.
Profit - the amount of money remaining after producers have paid all of their costs.
A tire-making company sells 1,000 tires and pays off the company that sold them the rubber used to make them. The money they have left is their profit.
Costs of Production - the money it takes to buy the goods to make a product.
When a bakery buys flower to make their bread.
Tax - a required payment of money to the government to help fund government services.
The government takes a small portion of everyones money to fund services to aid those people.
Regulations - rules about how companies conduct business.
Regulations are used to help eliminate things such as pollutants, discrimination, etc.
Total Costs - the sum of the fixed and variable production costs of a company.
The amount of money it takes a company to buy things that rarely change price and things that do constantly.

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