Compensated demand function: A hypothetical demand curve in which the consumer''s income is adjusted as the price changes so that the consumer''s utility remains at the same level.
Demand curve: A curve that represents graphically the relationship between the quantity of a good demanded by a consumer and the price of that good as the price varies.
Income effect: The impact of an income-induced change in demand caused by a change in price.
Income expansion path: The path connecting optimal consumption bundles that shows how a consumer changes his quantity demanded of specified goods as his income changes and prices remain constant.
Inferior good: A good for which demand decreases as the income of the consumer increases and the relative prices remain constant.
Normal good: A good whose demand curve is downward sloping.
Price-consumption path: The curve representing how consumption will vary when one price changes but all other prices and the consumer''s income remain constant.
Quantity demanded: The quantity of a good that people seek to purchase at a given price.
Relative prices: The ratio that tells how much a consumer in a market would have to forgo of one good in order to receive units of another good.
Substitution effect: The change in demand that results from an attempt to substitute a good whose price has decreased for another good whose price has remained constant after having nullified the implicit income effect.
Superior good: A good for which demand increases as the income of the consumer increases and the relative prices remain constant.
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