Cambridge International as and a level Economics Ebook

Complement: 
a good consumed with another.
Joint demand: 
when two
 
goods are consumed together.
KEY TERMS
Whether or not we would eat food from KFC is influenced by 
many factors
TOP TIP
A change in the price of a product is shown by a movement 
along the demand curve. The assumption is that all other 
factors aff ecting demand remain unchanged.
TOP TIP
A good for someone on a high income can be an inferior 
good whilst for someone on a low income, it can be a 
normal good.
Supply
To an economist, 
supply
refers to the
 quantities of a 
product that suppliers are willing and able 
to
 sell at various 
prices per period of time, other things being equal.
Supply: 
the quantity of a product that producers are willing 
and able to sell at diff erent prices.
KEY TERM
Note the similarities below with the earlier defi nition of 
demand:
■ 
Quantities: Economists oft en deal with numerical values and 
very oft en try to represent information in a quantitative way.
■ 
Product: As with demand we are using the term to refer to 
any item that is being traded. It can be used for goods or 
services. We could also stretch this to include tradable items 
like money or financial assets such as shares.
■ 
Suppliers: These are the sellers of the product and are 
oft en referred to as ‘producers’, although they may not 
be manufacturers of the product, they may simply be an 
intermediary in the chain or selling services. We could look at 
an individual company’s supply of a product or, more usefully, 
we can aggregate to look at the supply for an overall market.
■ 
Willing and able to sell at various prices: In a market 
economy, companies must gain from selling their products. 
They are also in the fortunate position that in many cases 
they can withhold supply if the price is too low. When price 
rises in the markets, it is assumed companies will be more 
willing and able to supply more to the market.
■ 
Per period of time: Supply must also be time related. It is of 
no use to say that Acer supplied 200 computers unless you 
specify the relevant time period. Clearly this needs to be 
consistent with the time period being used for demand.
■ 
Other things being equal: There are numerous potential 
influences on the supply of a product. Analysing the 
connections between the various elements is very diff icult 
if lots of these elements are changing simultaneously. So, 
we assume these other factors aff ecting supply remain 
unchanged, i.e., 
ceteris paribus
.