Chapter 3 - Supply and Demand Flashcards
Factor Market
Any place where factors of production (e.g. land, labor, capital) are bought and sold.
Product Market
Any place where finished goods and services (products) are bought and sold.
Opportunity Cost
The most desired goods or services that are foregone in order to obtain something else.
Supply
The ability and willingness to sell (produce) specific quantities of a good at alternative prices in a given time period, ceteris paribus.
Demand
The ability and willingness to buy specific quantities of a good at alternative prices in a given time period, ceteris paribus.
Demand Schedule
A table showing the qualities of a good consumer is willing and able to buy at alternative process in a given time period, ceteris paribus.
Demand Curve
A curve describing the quantities of a good and consumer is willing and able to buy at alternative prices in a given time period, ceteris paribus.
Law of Demand
The quality of a good demanded in a given time period as its price falls, ceteris paribus.
The determinants of market demands
Tastes (desire) Income Other goods Expectations Number of buyers
Substitute Goods
Goods that substitute for each other; when the price of a good x rises, the demand for good increases, ceteris paribus.
Complimentary Goods
Goods frequently consumed in combination; when the price of a good x rises, the demand for goods y falls, ceteris paribus.
Changes in quality demands
Movements along a given demand curve in response to price change of that good.
Changes in demand
shifts of the demand curve due to changes in taste, income, other goods, or expectations.
Market Demands
The total quantities of a good or service people are willing and able to buy at alternative prices in a given time period; the sum of individual demands.
Market Supply
The total quantities of a good that sellers are willing and able to sell at alternative prices in a given time period, ceteris paribus.
Market Supply Determinants
Technology Factor Cost Other goods Taxes and subsidies Expectations Number of Sellers
Law of Supply
The quantity of a good supplied in a given time period increases as it’s price increases, ceteris paribus.
Supply - Changes in quantity suppled:
Movements along a given supply curve.
Supply - Changes in supply:
Shift of the supply curve.
Market Mechanism
The use of market prices and sales to signal desired outputs (or resource allocation)
Price Floor
Lower limit set for the price of a good
Market Surplus
The amount by which the quantity supplied exceeds the quantity demanded at a given price; excess supply.
Market Shortage
The amount by which the quantity demanded exceeds the quantity supplied at a given price; excess demand.
