2. Competitive Markets: Demand and Supply

Question 1

demand

Answer 1

the various quantities of a good or service that consumers are willing and able to buy at different possible prices.

Question 2

marginal benefit

Answer 2

the extra or additional benefit received from consuming one more unit of a good or service.

Question 3

market

Answer 3

any kind of arrangement where buyers and sellers of a particular good, service or resource are linked together to carry out an exchange.

Question 4

market demand

Answer 4

the sum of all individual demands for a good or service.

Question 5

normal good

Answer 5

a good for which the demand varies positively with income.

Question 6

inferior good

Answer 6

a good for which the demand varies negatively (or indirectly) with income.

Question 7

substitute goods

Answer 7

two or more goods that satisfy a similar need, so that one good can be used in place of another.

Question 8

luxury good

Answer 8

a good that is not necessary or essential.

Question 9

complementary goods

Answer 9

two or more goods that tend to be used together.

Question 10

supply

Answer 10

the various quantities of a good that firms (or a firm) are willing and able to produce and sell at different possible prices during a particular time period.

Question 11

market supply

Answer 11

the sum of all individual firm supplies of a good or service.

Question 12

eqilibrium price

Answer 12

the price determined in a market when quantity demanded is equal to quantity supplied, and there is no tendency for the price to change.

Question 13

equlibrium quantity

Answer 13

the quantity that is bought and sold when a market is in equilibrium.

Question 14

shortage

Answer 14

the amount by which quantity demanded is greater than quantity supplied.

Question 15

shortage

Answer 15

the amount by which quantity demanded is greater than quantity supplied.

Question 16

surplus

Answer 16

the extra supply that results when quantity supplied is greater than quantity demanded.