Please enable JavaScript.

Coggle requires JavaScript to display documents.

Economics chapter 2A - Coggle Diagram

- - - - MU = change in total utility / change in quantity of good consumed
      - Definition: Beyond a certain point of consumption, as more and more units of a good/service are consumed, the additional utility a consumer derives from consuming successive units decrease.
  - - - Changes in the price of related goods
        
        Substitutes in consumption
        
        Definition: goods that can be used in place of one another for the satisfaction of a particular purpose
        
        Example: MacBook and Lenovo
        
        When units of MacBooks are consumed but still a need to satisfy wants, quantity demanded for Lenovo will increase.
        
        Complements in consumption
        
        Definition: goods used in conjunction with one another in the satisfaction of a particular purpose
        
        Example: iPhone and Singtel mobile phone subscription plan
        
        When the price of a mobile phone plan increases, quantity demanded of mobile phone plan decreases, thus demand of iPhones would also decrease.
      - Changes in consumers’ expectations
        
        Example: future income of the consumers and the future price of the good
        
        When consumer think that prices are going to increase in the future, they are likely to buy more now before price does go up
      - Change in onsumer’s income
        
        When income falls, demand of normal goods will also fall
        
        When income falls, demand of inferior goods will increase
      - Government policies
        
        Government policies influences
      - Changes in consumers’ taste and preferences
        
        1) travel advertisements with catchy slogans will increase peoples’ awareness of these countries
        2) reshape their perception of these places of interests
        3) changes taste and preferences favourably towards travel
        4) Increase in demand for travel to those countries
      - Changes in number or composition of consumers
        
        Example: when population grows, demand for rice will increase
    - - When the price of a good increases, its quantity demanded decreases and vice versa.
        
        When there is a change in the amount of good/service by consumers due to a change in price of the good/service , there is a change in quantity demanded of the good/service.
        
        change in quantity demanded is represented by the movement of a point along the demand curve
- - - - Change in price of raw materials, fuel, and power. An increase in the price of electricity will raise the cost of operating machines which producers will supply less of the good due to the higher production cost.
    - - Two goods are related because they are either substitutes or complements in consumption.
        
        Substitutes in production are goods that use the same resources in production. (For example, corn and soybeans can be considered as substitutes in production as they both require the same resources. If the price of corn rises, producers will put more soybean for sale and less soybean even though the price of soybean is lesser.
        
        Complements in production are goods that jointly produced like beef and leather, lumber and paper and honey and beeswax.
    - - Factors include weather and disease affecting output, wars affecting supply of raw materials and earthquake etc.. These events of production and reduce the quantity available for production, hence causing a fall in the supply of good and services.
    - - Price expected to rise, producers may temporarily reduce the amount they sell. Instead they are likely to build up their stocks and only release them on the market when the price does rise.
    - - If a more efficient technology is discovered, production costs will fall
    - - If number of sellers increases, supply will shift to the right
    - - Sometimes, government may intervene by imposing texts and subsidies. An indirect tax levied on the product will shift, the supply curve upwards.
- - - - Increase in demand>Increase in supply: Both Price and Quantity increase.
      - Increase in demand<Increase in supply: Quantity increases, but price decreases
      - Increase in demand=Increase in supply: Quantity increases, but price remains unchanged
    - - Decrease in demand<Decrease in supply: Quantity decreases but price increases
      - Decrease in demand>Decrease in supply: Both Price and Quantity decrease
      - Decrease in demand=Decrease in supply: Quantity decreases, but price remains unchanged