Chapter 3 – Demand, Supply, And Market Equilibrium Flashcards
Law of demand
Other things equal, as price falls the quantity demanded rises, and vice versa.
Demand
The schedule or curve that shows the various amount of a product that consumers are willing and able to purchase at each of a series of possible prices during a specified period of time.
Quantity demanded
The amount of a good or service buyers or a buyer desire to purchase at a particular price during some period.
Diminishing marginal utility
As a consumer increases the consumption of a good or service, the marginal utility obtain from each additional unit of a good or service decreases.
Income effect
A change in the price of a product changes of consumers real income or purchasing power and thus the quantity of the product purchased.
Substitution effect
A change in the price of a product changes the relative expensive miss of that good and hence changes the willingness to buy it rather than other goods.
Demand curve
A curve illustrating the inverse (negative) relationship between the quantity demanded of a good or service and it’s priced, other things equal.
Determinants of demand
Factors other than price the determine the quantity demanded of a good or service.
Increase in demand
An increase in the quantity demanded of a good or service and every price; a shift of the demand curve to the right.
Normal good
A good or service who’s consumption rises when income increases and falls when income decreases, price remaining constant.
Inferior good
A good or service who’s consumption falls when income increases and rises one income decreases, price remaining constant.
Substitute goods
Products or services that can be used in place of each other.
Complementary goods
Products and services that are used together.
Expectations
The anticipations of consumers, firms, and others about future economic conditions.
Change in demand
A change in the quantity demanded of a good or service that every prices; a shift of the entire demand curve to the right (increase in demand) or to the left (decrease in demand).
Change in quantity demanded
Of movement from one point to another on the fixed demand curve.
Supply
A schedule or curve that shows the amounts of the product the producers are willing and able to make available for sale at each of the series of possible prices during a specific period.
Quantity supplied
The amount of a good or service producers offered to sell at a particular price during some period.
Law of supply
The principle that, other things equal, an increase in the price of a product will increase the quantity of it supplied, and a decrease in the price of a product will decrease the quantity of it supplied.
Supply curve
Occurred illustrating the positive relationship between the quantity supplied of a good or service and it’s priced, other things equal.
Determinants of supply
Causes other than price to determine the quantity supplied of a good or service.
Tax
and in voluntary payment of money to a government by household or firm for which the household or firm receives no good or service directly in return.
Property tax
A tax on the value of property for example; capital, land, stocks and bonds, and other assets, owned by firms and households.
Change in supply
A change in the quantity supplied of a good or service that every price; a shift of the supply curve to the left or right.
Increase in supply
An increase in the quantity supplied of a good or service at every price; a shift in the supply curve to the right.
Change in quantity supplied
A movement from one point to another on a fixed supply curve.
Equilibrium price
The price in a competitive market which the quantity demanded and the quantity supplied are equal.
Equilibrium quantity
The quantity demanded and supply to be equilibrium price in a competitive market.
Surplus
The amount by which the quantity supplied of a product exceeds the quantity demanded at a specific above equilibrium price.
Shortage
The amount by which the quantity demanded of a product exceeds the quantity supplied of a specific below equilibrium price.
Rationing function of prices
The ability of the competitive forces of supply and demand to establish a price at which selling and buying decisions are consistent.
Productive efficiency
The production of a good in the least costly way.
Allocative efficiency
The distribution of resources among firms and industry to produce the goods most wanted by society.
