CH 3 Flashcards
other things being equal
ceteris paribus
goods that are often used together so that consumption of one good tends to enhance consumption of the other
complements
the extra benefit consumers receive from buying a good or service, measured by what the individuals would have been willing to pay minus the amount that they actually paid
consumer surplus
the loss in social surplus that occurs when a market produces an inefficient quantity
deadweight loss
the relationship between price and the quantity demanded of a certain good or service
demand
a graphic representation of the relationship between price and quantity demanded of a certain good or service, with quantity on the horizontal axis and the price on the vertical axis
demand curve
a table that shows a range of prices for a certain good or service and the quantity demanded at each price
demand schedule
the situation where quantity demanded is equal to the quantity supplied; the combination of price and quantity where there is no economic pressure from surpluses or shortages that would cause price or quantity to change
equilibrium
the price where quantity demanded is equal to quantity supplied
equilibrium price
the quantity at which quantity demanded and quantity supplied are equal for a certain price level
equilibrium quantity
at the existing price, the quantity demanded exceeds the quantity supplied; also called a shortage
excess demand
at the existing price, quantity supplied exceeds the quantity demanded; also called a surplus
excess supply
the resources such as labor, materials, and machinery that are used to produce goods and services; also called inputs
factors of production
a good in which the quantity demanded falls as income rises, and in which quantity demanded rises and income falls
inferior good
the resources such as labor, materials, and machinery that are used to produce goods and services; also called factors of production
inputs
the common relationship that a higher price leads to a lower quantity demanded of a certain good or service and a lower price leads to a higher quantity demanded, while all other variables are held constant
law of demand
the common relationship that a higher price leads to a greater quantity supplied and a lower price leads to a lower quantity supplied, while all other variables are held constant
law of supply
a good in which the quantity demanded rises as income rises, and in which quantity demanded falls as income falls
normal good
what a buyer pays for a unit of the specific good or service
price
a legal maximum price
price ceiling
government laws to regulate prices instead of letting market forces determine prices
price control
a legal minimum price
price floor
the extra benefit producers receive from selling a good or service, measured by the price the producer actually received minus the price the producer would have been willing to accept
producer surplus
the total number of units of a good or service consumers are willing to purchase at a given price
quantity demanded
the total number of units of a good or service producers are willing to sell at a given price
quantity supplied
when a change in some economic factor (other than price) causes a different quantity to be demanded at every price
shift in demand
when a change in some economic factor (other than price) causes a different quantity to be supplied at every price
shift in supply
at the existing price, the quantity demanded exceeds the quantity supplied; also called excess demand
shortage
the sum of consumer surplus and producer surplus
social surplus
a good that can replace another to some extent, so that greater consumption of one good can mean less of the other
substitute
the relationship between price and the quantity supplied of a certain good or service
supply
a line that shows the relationship between price and quantity supplied on a graph, with quantity supplied on the horizontal axis and price on the vertical axis
supply curve
a table that shows a range of prices for a good or service and the quantity supplied at each price
supply schedule
at the existing price, quantity supplied exceeds the quantity demanded; also called excess supply
surplus
