Microeconomics

Perfect Substitute Goods

Perfect Substitute Goods are those goods that can satisfy the same necessity in exactly the same way. A substitute good can be used in place of another. If the consumer can choose between buying one substitute good or another, she will buy the cheaper one.

Demand in Economics

Demand Definition: In economics, demand is the quantity of a good that consumers are willing and able to purchase.

The most important determinants of demand are:

Price of the good.
Price of related goods.
Disposable income.
Consumer’s preferences.

The Demand Curve and the Law of Demand

The demand curve is a graph that describes the relationship between price and quantity demanded.

Economic Variables

Economic variables are measurements that describe economic units, like the GDP, Inflation or Interest Rates.

A variable is defined as a set of attributes of an object. Attributes are characteristics that describe an object. Economic variables are measurements that describe economic units, for example, a country, a government, a company or a person.

Vertical Supply

A vertical supply represents a situation in which the offered quantity is fixed and do not changes when the price changes. The vertical supply is also called perfect inelastic supply because the variation in quantity is always zero.

Price elasticity of the supply measures the responsiveness of the quantity supplied when the price variates. It is defined by the proportional change in the quantity supplied, divided the proportional change in the price:

e_s= (ΔQ/Q)/(ΔP/P)

Where:

Microeconomic Variables

Microeconomics studies studies individual units, like families or businesses. Macroeconomics studies economic aggregates.

Microeconomic variables are those patterns or elements that can be used to describe the behavior of a person or an individual economic unit, like a business. A variable is a magnitude that may have different values in different periods of time. Variables are measurements that help to understand the behavior of economic units or the behavior of the economy as whole.

Branches of Economics

Behavioural Economics
Ecological Economics
Environmental Economics
Health Economics
Information Economics
International Economics
Labour Economics
Monetary Economics
Population Economics
Public Finance
Urban Economics

Microeconomics

Cross Elasticity of Demand

The cross elasticity of demand measures the responsiveness of the quantity demanded, when the price of another good changes. It is defined as the percentage change in the quantity demanded divided the percentage change in the price of the second good.

e_AB = (ΔQ_A/Q_A)/(ΔP_B/P_B)

The cross elasticity gives us important information about the economic relation between the goods and services.

Substitute Goods

Definition of Substitute Goods

Substitute goods are those goods that can satisfy the same necessity, they can be used for the same end.

Complementary Goods

Definition of Complementary Goods

Complementary goods are goods that are usually consumed together or that have the ability to provide a higher utility when consumed together.

Demand Elasticity

The elasticity of the demand shows the responsiveness of the quantity demanded to a change in the price.

It is defined as the proportional change in the quantity demanded, divided the proportional change in the price.

e = (ΔQ/Q)/(ΔP/P)

When the price increases (+), the quantity demanded decreases (-): the demand elasticity is usually negative.

Graphically:

EconomicPoint

Microeconomics

Perfect Substitute Goods

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Demand in Economics

The Demand Curve and the Law of Demand

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Economic Variables

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Vertical Supply

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Microeconomic Variables

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Branches of Economics

Microeconomics

Cross Elasticity of Demand

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Substitute Goods

Definition of Substitute Goods

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Complementary Goods

Definition of Complementary Goods

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Demand Elasticity

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