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Income–consumption Curve
In economics and particularly in consumer choice theory, the income-consumption curve (also called income expansion path and income offer curve) is a curve in a graph in which the quantities of two goods are plotted on the two axes; the curve is the locus of points showing the consumption bundles chosen at each of various levels of income. The income effect in economics can be defined as the change in consumption resulting from a change in real income. This income change can come from one of two sources: from external sources, or from income being freed up (or soaked up) by a decrease (or increase) in the price of a good that money is being spent on. The effect of the former type of change in available income is depicted by the income-consumption curve discussed in the remainder of this article, while the effect of the freeing-up of existing income by a price drop is discussed along with its companion effect, the substitution effect, in the article on the latter. For example, i ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Economics
Economics () is the social science that studies the Production (economics), production, distribution (economics), distribution, and Consumption (economics), consumption of goods and services. Economics focuses on the behaviour and interactions of Agent (economics), economic agents and how economy, economies work. Microeconomics analyzes what's viewed as basic elements in the economy, including individual agents and market (economics), markets, their interactions, and the outcomes of interactions. Individual agents may include, for example, households, firms, buyers, and sellers. Macroeconomics analyzes the economy as a system where production, consumption, saving, and investment interact, and factors affecting it: employment of the resources of labour, capital, and land, currency inflation, economic growth, and public policies that have impact on glossary of economics, these elements. Other broad distinctions within economics include those between positive economics, desc ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Consumer Choice Theory
The theory of consumer choice is the branch of microeconomics that relates preferences to consumption expenditures and to consumer demand curves. It analyzes how consumers maximize the desirability of their consumption as measured by their preferences subject to limitations on their expenditures, by maximizing utility subject to a consumer budget constraint. Factors influencing consumers' evaluation of the utility of goods: income level, cultural factors, product information and physio-psychological factors. Consumption is separated from production, logically, because two different economic agents are involved. In the first case consumption is by the primary individual, individual tastes or preferences determine the amount of pleasure people derive from the goods and services they consume.; in the second case, a producer might make something that he would not consume himself. Therefore, different motivations and abilities are involved. The models that make up consumer theory are ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Locus (mathematics)
In geometry, a locus (plural: ''loci'') (Latin word for "place", "location") is a set of all points (commonly, a line, a line segment, a curve or a surface), whose location satisfies or is determined by one or more specified conditions.. In other words, the set of the points that satisfy some property is often called the ''locus of a point'' satisfying this property. The use of the singular in this formulation is a witness that, until the end of the 19th century, mathematicians did not consider infinite sets. Instead of viewing lines and curves as sets of points, they viewed them as places where a point may be ''located'' or may move. History and philosophy Until the beginning of the 20th century, a geometrical shape (for example a curve) was not considered as an infinite set of points; rather, it was considered as an entity on which a point may be located or on which it moves. Thus a circle in the Euclidean plane was defined as the ''locus'' of a point that is at a given dist ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Real Income
Real income is the income of individuals or nations after adjusting for inflation. It is calculated by dividing nominal income by the price level. Real variables such as real income and real GDP are variables that are measured in physical units, while nominal variables such as nominal income and nominal GDP are measured in monetary units. Therefore, real income is a more useful indicator of well-being since it measures the amount of goods and services that can be purchased with the income. According to the classical dichotomy theory, real variables and nominal variables are separate in the long run In economics, the long-run is a theoretical concept in which all markets are in equilibrium, and all prices and quantities have fully adjusted and are in equilibrium. The long-run contrasts with the short-run, in which there are some constraints an ..., so they are not influenced by each other. In other words, if the nominal starting income was 100 and there was 10% inflation (gen ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Substitution Effect
In economics and particularly in consumer choice theory, the substitution effect is one component of the effect of a change in the price of a good upon the amount of that good demanded by a consumer, the other being the income effect. When a good's price decreases, if hypothetically the same consumption bundle were to be retained, income would be freed up which could be spent on a combination of more of each of the goods. Thus the new total consumption bundle chosen, compared to the old one, reflects both the effect of the changed relative prices of the two goods (one unit of one good can now be traded for a different quantity of the other good than before as the ratio of their prices has changed) ''and'' the effect of the freed-up income. The effect of the relative price change is called the ''substitution effect'', while the effect due to income having been freed up is called the ''income effect''. If income is altered in response to the price change such that a new budg ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Utility
As a topic of economics, utility is used to model worth or value. Its usage has evolved significantly over time. The term was introduced initially as a measure of pleasure or happiness as part of the theory of utilitarianism by moral philosophers such as Jeremy Bentham and John Stuart Mill. The term has been adapted and reapplied within neoclassical economics, which dominates modern economic theory, as a utility function that represents a single consumer's preference ordering over a choice set but is not comparable across consumers. This concept of utility is personal and based on choice rather than on pleasure received, and so is specified more rigorously than the original concept but makes it less useful (and controversial) for ethical decisions. Utility function Consider a set of alternatives among which a person can make a preference ordering. The utility obtained from these alternatives is an unknown function of the utilities obtained from each alternative, not the sum of ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Comparative Statics
In economics, comparative statics is the comparison of two different economic outcomes, before and after a change in some underlying exogenous variable, exogenous parameter. As a type of ''static analysis'' it compares two different economic equilibrium, equilibrium states, after the process of adjustment (if any). It does not study the motion towards equilibrium, nor the process of the change itself. Comparative statics is commonly used to study changes in supply and demand when analyzing a single Market (economics), market, and to study changes in monetary policy, monetary or fiscal policy when analyzing the whole macroeconomics, economy. Comparative statics is a tool of analysis in microeconomics (including general equilibrium analysis) and macroeconomics. Comparative statics was formalized by Sir John Richard Hicks, John R. Hicks (1939) and Paul A. Samuelson (1947) (Kehoe, 1987, p. 517) but was presented graphically from at least the 1870s. For models of stable equili ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Feasible Set
In mathematical optimization, a feasible region, feasible set, search space, or solution space is the set of all possible points (sets of values of the choice variables) of an optimization problem that satisfy the problem's constraints, potentially including inequalities, equalities, and integer constraints. This is the initial set of candidate solutions to the problem, before the set of candidates has been narrowed down. For example, consider the problem of minimizing the function x^2+y^4 with respect to the variables x and y, subject to 1 \le x \le 10 and 5 \le y \le 12. \, Here the feasible set is the set of pairs (''x'', ''y'') in which the value of ''x'' is at least 1 and at most 10 and the value of ''y'' is at least 5 and at most 12. The feasible set of the problem is separate from the objective function, which states the criterion to be optimized and which in the above example is x^2+y^4. In many problems, the feasible set reflects a constraint that one or more ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Income Consumption Curve Graph
Income is the consumption and saving opportunity gained by an entity within a specified timeframe, which is generally expressed in monetary terms. Income is difficult to define conceptually and the definition may be different across fields. For example, a person's income in an economic sense may be different from their income as defined by law. An extremely important definition of income is Haig–Simons income, which defines income as ''Consumption + Change in net worth'' and is widely used in economics. For households and individuals in the United States, income is defined by tax law as a sum that includes any wage, salary, profit, interest payment, rent, or other form of earnings received in a calendar year.Case, K. & Fair, R. (2007). ''Principles of Economics''. Upper Saddle River, NJ: Pearson Education. p. 54. Discretionary income is often defined as gross income minus taxes and other deductions (e.g., mandatory pension contributions), and is widely used as a basis to comp ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Normal Goods
In economics, a normal good is a type of a good which experiences an increase in demand due to an increase in income, unlike inferior goods, for which the opposite is observed. When there is an increase in a person's income, for example due to a wage rise, a good for which the demand rises due to the wage increase, is referred as a normal good. Conversely, the demand for normal goods declines when the income decreases, for example due to a wage decrease or layoffs. Analysis There is a positive correlation between the income and demand for normal goods, that is, the changes income and demand for normal goods moves in the same direction. That is to say, that normal goods have an elastic relationship for the demand of a good with the income of the person consuming the good. In economics, the concept of elasticity, and specifically income elasticity of demand is key to explain the concept of normal goods. Income elasticity of demand measures the magnitude of the change in demand f ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Income Consumption Curve Graph - Upward Sloping (normal Goods)
Income is the Consumption (economics), consumption and saving opportunity gained by an entity within a specified timeframe, which is generally expressed in monetary terms. Income is difficult to define conceptually and the definition may be different across fields. For example, a person's income in an economic sense may be different from their income as defined by law. An extremely important definition of income is Haig–Simons income, which defines income as ''Consumption + Change in net worth'' and is widely used in economics. For households and individuals in the United States, income is defined by tax law as a sum that includes any wage, salary, profit (accounting), profit, interest payment, Renting, rent, or other form of earnings received in a calendar year.Case, K. & Fair, R. (2007). ''Principles of Economics''. Upper Saddle River, NJ: Pearson Education. p. 54. Discretionary income is often defined as gross income minus taxes and other deductions (e.g., mandatory pensio ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Income Consumption Curve Graph - Downward Sloping (inferior Goods)
Income is the consumption and saving opportunity gained by an entity within a specified timeframe, which is generally expressed in monetary terms. Income is difficult to define conceptually and the definition may be different across fields. For example, a person's income in an economic sense may be different from their income as defined by law. An extremely important definition of income is Haig–Simons income, which defines income as ''Consumption + Change in net worth'' and is widely used in economics. For households and individuals in the United States, income is defined by tax law as a sum that includes any wage, salary, profit, interest payment, rent, or other form of earnings received in a calendar year.Case, K. & Fair, R. (2007). ''Principles of Economics''. Upper Saddle River, NJ: Pearson Education. p. 54. Discretionary income is often defined as gross income minus taxes and other deductions (e.g., mandatory pension contributions), and is widely used as a basis to comp ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
