Chapter 1 - Supply and Demand

Demand - Key Terms

Substitute Since quantity demanded of butter rises when the price of margarine goes up, ceteris paribus, margarine is a substitute for butter.

Complement Since quantity demanded of butter rises when the price of bread goes up, ceteris paribus, bread is a complement to butter.

Normal Good If quantity demanded of a given commodity rises when total household income increases, ceteris paribus, that commodity is said to be a normal good.

Inferior Good If quantity demanded of a given commodity falls when total household income increases, ceteris paribus, that commodity is said to be an inferior good. A classic example of such a good is macaroni and cheese dinners. When people become better off they tend to switch to higher quality substitutes like Fettucini Alfredo.

Substitute	Since quantity demanded of butter rises when the price of margarine goes up, ceteris paribus, margarine is a substitute for butter.
Complement	Since quantity demanded of butter rises when the price of bread goes up, ceteris paribus, bread is a complement to butter.
Normal Good	If quantity demanded of a given commodity rises when total household income increases, ceteris paribus, that commodity is said to be a normal good.
Inferior Good	If quantity demanded of a given commodity falls when total household income increases, ceteris paribus, that commodity is said to be an inferior good. A classic example of such a good is macaroni and cheese dinners. When people become better off they tend to switch to higher quality substitutes like Fettucini Alfredo.