Chapter 3 Flashcards
A function that shows the quantity demanded at different prices
Demand curve
The quantity that buyers are willing and able to buy at a particular price
Quantity demanded
The consumer’s gain from exchange, or the difference between the maximum price a consumer is willing to pay for a certain quantity and the market price
Consumer surplus
Quantity measured by the area beneath the demand curve and above the price
Total consumer surplus
A good for which demand increases when income increases
Normal good
A good for which demand decreases when income increases
Inferior good
Two goods for which a decrease in the price of one leads to a decrease in demand for the other
Substitute
Two goods for which a decrease in the price of one leads to an increase in the demand for the other, for example hamburgers and hamburger buns
Complements
A function that shows the quantity supplied at different prices
Supply Curve
The quantity that seller are willing and able to sell at a particular price
Quantity supplied
The producer’s gain from exchange, or the difference between the market price and the minimum price at which a producer would be willing to sell a particular quantity
Producer surplus
An amount measured by the area above the supply curve and below the price up to the quantity traded
Total producer surplus
