Ch. 4 supply and demand Flashcards
The relationship between a good‘s price, and the amount that people are willing to buy
Demand
The relationship between a goods price and the amount that producers are willing to supply for consumers
Supply
Value that is directly related to the benefits their owners receive through their use
Value in use
What a particular good is worth in exchange for some other good
Value in exchange
The amount of money that a buyer pays the seller for a particular item
Price
As ones supply of a specific good or increase service, the satisfaction derived from each additional unit tends to decrease
Diminishing marginal utility
The amount of satisfaction that results from a one unit increase of a product
Marginal utility
The total amount of satisfaction received from possessing a particular amount of a good
Total utility
Other things remaining equal as the price of a good increases the quantity demanded decreases in a free market economy
Law of demand
Indicates that people tend to substitute less expensive goods for ones whose prices have risen
Substitution effect
States that when the price of a good falls consumers tend to buy more of that good
Income effect
A list of numbers that compares price with quantity demanded
Demand schedule
A graphic representation of the quantity of goods purchased at different prices
Demand curve
A good whose demand is directly related to consumers incomes
Normal goods
Demand for these items decreases as consumers incomes increase and vice versa
Inferior goods
A good capable of being used in place of another good
Substitutes
A good often used in conjunction with another
Complements
Other things remain equal as the price of a good increases the quantity supplied also increases in a free market economy
Law of supply
A list of numbers that compares price with quantity supplied
Supply schedule
A graphic representation of the quantity of goods supplied at different prices
Supply curve
Sums of money the government gives to a business to encourage production
Subsidies
The point at which quantity demanded and quantity supplied are equal
Equilibrium
The situation in which the quantity demanded exceeds the quantity supplied at a given price
Shortage
The quantity supplied of a good is greater than the quantity demanded at a given price
Surplus
