Chapter 4 Flashcards
In today’s society we tend to find our goods and services in
markets.
Market
any arrangement that brings buyers and sellers together.
A market has two sides:
buyers (demanders) and sellers (suppliers) and they are the one’s who define it.
Quantity Demanded
the amount of any good, service, or resource that people are willing and able to buy during a specified period at a specific price. It is one quantity at one price.
Demand
the relationship between the quantity demanded and the price of a good when al other influences on buying plans remain the same. It is a list of quantities at different prices.
The Law of Demand states that
other things remaining the same, if the price of a good rises, the quantity demanded of that good decreases; and if the price of a good falls, the quantity demanded of that good increases.
A demand schedule
a list of the quantities demanded at each different price when all the other influences on buying plans remain the same.
A demand curve
a graph of the relationship between the quantity demanded of a good and its price when all other influences on buying plans remain the same.
Change in Demand
refers to a change in the quantity that people plan to buy when any influence on buying plans other than the price of the good changes.
The main influences on buying plans that change demand:
Prices of related goods Expected future prices Income Expected future income and credit Number of buyers Preferences
A substitute
a good that can be consumed in place for another good.
A complement
is a good that can be consumed with another good.
A normal good
a good for which demand increases (decreases) when income increases (decreases)
An inferior good
is a good for which demand decreases (increases) when income increases (decreases).
A change in quantity demanded is _____ from a change in demand.
Different
A change in quantity demanded refers to
a change in the quantity of a good that people plan to buy that results from a change in the price of the good with all other influences on buying plans remaining the same. This change does not shift the demand curve, but rather moves along it.
Quantity Supplied
The amount of any good, service, or resource that people are willing and able to sell during a specified period at a specified price. It is one quantity at one price.
Supply
The relationship between the quantity supplied and the price of a good when al other influences on selling plans remain the same. It is a list of quantities at different prices.
The Law of Supply states
That other things remaining the same, if the price of a good rises, the quantity supplied of that good increases; and if the price of a good falls, the quantity supplied of that good decreases.
Supply Schedule
a list of the quantities supply at each different price when all the other influences on selling plans remain the same.
Supply Curve
a graph of the relationship between the quantity supplied of a good and its price when all other influences on selling plans remain the same.
Change in Supply
refers to a change in the quantity that suppliers plan to sell when any influence on selling plans other than the price of the good changes.
The main influences on selling plans that change supply
Prices of related goods Prices of resources and other inputs Expected future prices Number of sellers Productivity
A substitute in production for a good is
another good that can be produced in its place.
A complement in production of a good is
another good that is produced along with it.
A change in quantity supplied is ______ from a change in supply.
Different
A change in quantity supplied refers to ______. Does it shift the supply curve?
a change in the quantity of a good that suppliers plan to sell that results from a change in the price of the good with all other influences on selling plans remaining the same. This change does not shift the supply curve, but rather moves along it.
Market equilibrium occurs when
the quantity demanded equals the quantity supplied—when buyers’ and sellers’ plans are in balance.
When we combine the demand curve and supply curve we capture the
full picture of a market and the market equilibrium.
At the equilibrium price, the quantity demanded equals the
quantity supplied.
The equilibrium quantity is the
quantity bought and sold at the equilibrium price.
Surplus
the quantity supplied exceeds the quantity demanded.
Shortage
the quantity demanded exceeds the quantity supplied.
A market can be out of balance in the event of a
surplus or shortage
law of market forces indicates that
when there is a surplus, the price falls; and when there is a shortage, the price rises.
Factors that shift Demand
Prices of related goods Expected future prices Income Expected future income and credit Number of buyers Preferences
Factors that shift Supply
Prices of related goods Prices of resources and other inputs Expected future prices Number of sellers Productivity
