CBSE Class 12 - Economics - CH2 - Consumer's Equilibrium and Demand - Important Definitions (#eduvictors)(#cbseNotes)

Economics - Chapter -
Consumer's Equilibrium and Demand - Important Definitions

Consumer:
It is an economic agent who consumes final goods and services.

Total Utility:
It is the sum of satisfaction from consumption of all the units of a commodity at a given time.


Marginal Utility:
It is a net increase in total utility by consuming an additional unit of a commodity.


Law of Diminishing Marginal Utility: 
As consumer consumes more and more units of commodity. The Marginal utility derived from the last each successive units goes on declining.


Consumer’s Bundle: 
It is a quantitative combination of two goods which can be purchased by a consumer from his given income.


Budget set: 
It is quantitative combination of those bundles which a consumer can purchase his from given income at prevailing market prices.



Consumer Budget: 
It states the real income or purchasing power of the consumer from which he can purchase the certain quantitative bundles of two goods at given price.


Budget Line: 
Shows those combinations of two goods which a consumer can buy from limited income on same curve.


Monotonic Preferences: 
Consumer’s preferences are called monotonic when between any two bundles, one bundle has more of one good and no less of other good.


Change in Budget Line: 
There can be parallel shift (leftwards or rightwards) due to change in income of the consumer and change in price of goods.


Indifference Curve: 
It is a curve showing different combination of two goods, each combinations offering the same level of satisfaction to the consumer.


Consumer’s Equilibrium: 
It is a situation where a consumer is spending his income in such a way that he is getting maximum satisfaction.


Demand: 
It is that quantity which a consumer is able and is willing to buy at given price and in a given period of time.


Market Demand: 
It is the total quantity purchased by all the consumers in the market at given price and in a given period of time.


Demand Function: 
It is the functional relationship between the demand of a good and factors affecting demand.


Change in Demand: 
When demand changes due to change in any one of its determinants other than the price.


Change in Quantity Demanded: 
When demand changes due to change in its own price.


Price Elasticity of Demand: 
Price Elasticity of Demand is a measurement of change in quantity demanded in response to a change in price of the commodity.


Total Expenditure Method: 
It measures price elasticity of demand on the basis of change in total expenditure incurred on the commodity by a household as a result of change in its price.