Definition of composite demand Demand for a good that has multiple different uses. e.g. People may demand oil because it can be used to create either petrol or plastics. Examples of composite demand People may demand wheat for producing bread, biofuels or feeding livestock. Land can be used for farming or building houses. Steel could …
Definition of Concentration Ratios The percentage of market share taken up by the largest firms. It could be a 3 firm concentration ratio (market share of 3 biggest) or a 5 firm concentration ratio. Concentration ratios are used to determine the market structure and competitiveness of the market. For example, an oligopoly is defined when …
Definition constant prices Constant prices are a way of measuring the real change in output. A year is chosen as the base year. For any subsequent year, the output is measured using the price level of the base year. This excludes any nominal change in output and enables a comparison of the actual goods and …
Definition of constant returns to scale When an increase in inputs (capital and labour) cause the same proportional increase in output. Constant returns to scale occur when increasing the number of inputs leads to an equivalent increase in the output. Long run Returns to scale occur in the long run – when both labour and …
Definition of consumer durables These are consumer goods that are bought for a long time period. They can usually last several years and include items such as: TV DVD player Cars Yachts Bikes Because they are only bought every several years, consumption patterns tend to be more volatile. For example, in a recession, there will …
Definition consumer sovereignty Consumer sovereignty is the idea that it is consumers who influence production decisions. The spending power of consumers means effectively they ‘vote’ for goods. Firms will respond to consumer preferences and produce the goods demanded by consumers. It is a manifestation of the ‘invisible hand’ Others argue that consumer sovereignty is a …
Definition of Consumer Surplus This is the difference between what the consumer pays and what he would have been willing to pay. For example: If you would be willing to pay £50 for a ticket to see the F. A. Cup final, but you can buy a ticket for £40. In this case, your consumer …
Definition consumption externality This occurs when consuming a good cause either a positive or negative externality to a third party. Positive consumption externality When consuming a good gives a benefit to others. Examples include: Going to university. Your education gives benefit to rest of society (You can teach others) Taking medicine which prevents spread of …