- Income Effect
A change in consumption due to a change in income.
Example: When you buy cheaper breads after you get a salary cut.
- Normal Goods vs. Inferior Goods
Normal goods : The demand of this product will increase when people's income increase
Inferior Goods: Demand of this product will decrease when people's income increase.
Example: Luxury clothes and less-known brand clothes.
- Complements
A product that is used alongside of other products. Cannot really stand alone.
example: Smartphone case is a complement product of your smartphone. No-one really by the case without having the phone.
- Substitutes
A product that is used in exchange of another product.
Example : When you drink tea after you run out of coffee.
- Fixed costs
A cost that remain the same regardless of how much goods or services you produce.
Example: Bulding rent.
- Variable costs
A cost that will increase when you increase the production of your goods or services.
Example: Cost of materials.
- Consumer Surplus
A difference betweenthe price that people willing to pay compared to the actual price that they pay.
Example: If you have a $500 budget for a laptop and you managed to purchase it for $400, you have a $100 customer surplus.
- Bartering
when you exchange one product with another without using any monetary instrument.
Example: When you exchange your Jacket with your friend's pants.
