Ch 3 - Demand and Supply Flashcards
What are markets?
The institutions that bring together buyers and sellers.
What is a demand schedule and a supply schedule?
A table that shows the quantities of a good or service (demanded/sellers are willing to sell) at different prices during a particular period, all other things unchanged.
What is the quantity demanded?
Of a good or service, it is the quantity users are willing and able to buy at a particular price during at a particular period, all other things unchanged.
What is the law of demand?
It holds that, 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.
A shift in a demand curve is called…
A change in demand
What is a demand shifter?
A variable that can change the quantity of a good or service demanded at each price.
What are complementary goods?
Goods that if a reduction in the price of one good increases the demand for another.
What are substitutes?
When a reduction in the price of one good reduces the demand for another.
What is a “normal good?”
A good for which demand increases when income increases
What is an “inferior good?”
A good for which demand decreases when income increases
What is the equilibrium price?
In any market, this is the price at which quantity demanded equals quantity supplied.
What is equilibrium quantity?
The quantity demanded and supplied at the equilibrium price.
What is a surplus?
A surplus is the amount by which the quantity supplied exceeds the quantity demanded at the current price. (There is, of course, no surplus at the equilibrium price; a surplus only occurs if t he current price exceeds the equilibrium price.
What is a shortage?
The amount by which the quantity demanded exceeds the quantity supplied at the current price.
