CH 3 Flashcards
Markets
The institutions that bring together buyers and sellers
Quantity Demanded
The quantity buyers are willing and able to buy of a good or service at a particular price during a particular period, all other things unchanged
Demand schedule
A table that shows the quantities of a good or service demanded at different prices during a particular period, all other things unchanged
Demand curve
A graphical representation of a demand schedule
Change in quantity demanded
A movement along a demand curve that results from a change in price
Law of demand
For virtually all goods and services, a higher price leads to a reduction in quantity demanded and a lower price leads to an increase in quantity demanded
Change in demand
A shift in a demand curve
Demand shifter
A variable that can change the quantity of a good or service demanded at each price
Complements
Two goods for which an increase in price of one reduces the demand for the other
Substitutes
Two goods for which an increase in price of one increases the demand for the other
Normal good
A good for which demand increases when income increases
Inferior Good
A good for which demand decreases when income increases
Quantity Supplied
The quantity sellers are willing to sell of a good or service at a particular price during a particular period, all other things unchanged
Supply Schedule
A table that shows quantities supplied at different prices during a particular period, all other things unchanged
Supply curve
A graphical representation of a supply schedule
Change in quantity supplied
Movement along the supply curve caused by a change in price
Change in supply
A shift in the supply curve
Supply shifter
A variable that can change the quantity of a good or service supplied at each price level
Examples of supply shifters…
Prices of factors of production, returns from alternative activities, technology, seller expectations, natural events and the number of sellers
Model of demand and supply
Model that uses demand and supply curves to explain the determination of price and quantity in a market
Equilibrium price
The price at which quantity demanded equals quantity supplied
Equilibrium Quantity
The quantity demanded and supplied at the equilibrium price
Surplus
The amount by which the quantity supplied exceeds the quantity demanded at the current price
Shortage
The amount by which the quantity demanded exceeds the quantity supplied at the current price
Price floor
A minimum allowable price set above the equilibrium price
Price ceiling
A maximum allowable price
