ECON 2310 Chapter Notes - Chapter 6: Giffen Good, Economic Surplus
Document Summary
Uncompensated price change- consists of a price change with no change in income. Compensated price change- consists of a price change and an income change which leave the consumer"s wellbeing unaffected. Substitution effect of a price change- the effect on consumption of a compensated price change. Income effect of a price change- the effect on consumption of removing compensation after creating a compensated price change. Law of demand- states that demand curves usually slope downward. Giffen good- a product is called a giffen good if the amount purchased increases as the price rises. Compensating variation- the amount of money that exactly compensates the consumer for a change in circumstances. Consumer surplus- the net benefit a consumer receives from participating in the market for some good. Cost of living index- measures the relative cost of achieving a fixed standard of living in different situations. Nominal income- the amount of money actually received in a particular period.