Explain the Differences Between a Change in Supply and a Change

question 94

Essay

Explain the differences between a change in supply and a change in quantity supplied.

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Definitions:

Perfect Substitutes

Goods that can serve the same purpose perfectly, where consumers are indifferent between them and will select based on price.

Giffen Good

A product that paradoxically sees an increase in demand as its price increases, violating the basic law of demand due to the income effect overshadowing the substitution effect.

Inferior Good

A type of good whose demand decreases as the income of consumers increases, opposite of a normal good.

Substitution Effect

The change in consumption patterns due to a change in the relative price of goods, leading consumers to substitute away from higher-priced goods toward lower-priced ones.