Part 1: Distinguish between the following: 1. Normal goods and inferior goods 2. Complementary goods and substitute goods 3. Market demand and individual demand 4. Individual supply and market supply 5. Excess demand and excess supply

1. **Normal goods vs. Inferior goods:** **Normal goods** are those for which demand increases as consumer income rises. For example, if someone gets a raise, they might eat out at restaurants more often. **Inferior goods**, on the other hand, see a decrease in demand as income rises. An example might be instant ramen; as someone's income increases, they might switch to fresher, higher-quality food options, reducing their consumption of instant ramen.<br /><br />2. **Complementary goods vs. Substitute goods:** **Complementary goods** are consumed together. Think peanut butter and jelly – an increase in the demand for peanut butter usually leads to an increase in the demand for jelly. **Substitute goods** can replace each other. Tea and coffee are substitutes; if the price of coffee rises significantly, some consumers might switch to tea, increasing the demand for tea.<br /><br />3. **Market demand vs. Individual demand:** **Individual demand** represents the quantity of a good or service a single consumer is willing and able to purchase at various price points. **Market demand** is the sum of all individual demands for that good or service in a particular market. It represents the total quantity demanded by all consumers.<br /><br />4. **Individual supply vs. Market supply:** **Individual supply** is the quantity of a good or service a single producer is willing and able to offer for sale at different prices. **Market supply** is the sum of all individual supplies for a specific good or service in a given market. It represents the total quantity supplied by all producers.<br /><br />5. **Excess demand vs. Excess supply:** **Excess demand** (or a shortage) occurs when the quantity demanded of a good or service is greater than the quantity supplied at a given price. This typically leads to price increases. **Excess supply** (or a surplus) occurs when the quantity supplied is greater than the quantity demanded at a given price. This usually puts downward pressure on prices.<br />