Chapter 4 Key Terms Flashcards
Invisible hand
a phrase used by Adam Smith to describe how, by pursuing their own self-interests, people in a market system are led to promote the well-being of the community
Quantity demanded
the number of units of a good that consumers are willing and can afford to buy over a specified period of time
Demand schedule
a table showing how the quantity demanded of some product during a specified period of time changes as the price of that product changes, holding all other determinants of quantity demanded constant
Demand curve
a graphical depiction of a demand schedule, showing how the quantity demanded of some product will change as the price of that product changes during a specified period of time, holding all other determinants of quantity demanded constant
Shift in a demand curve
this occurs when any relevant variable other than price changes – to the right (or outward) if consumers want to buy more at any all given prices than they wanted previously, and to the left (or inward) if they desire less
Quantity supplied
the number of units that sellers want to sell over a specified period of time
Supply schedule
a table showing how the quantity supplies of some product changes as the price of that product changes during a specified period of time, holding all other determinants of quantity supplied constant
Supply curve
a graphical depiction of a supply schedule showing how the quantity supplied of some product will change as the price of that product changes during a specified period of time, holding all other determinants of quantity supplied constant
Supply-demand diagram
a graph of supply and demand curves together; determines the equilibrium price and quantity
Shortage
an excess of quantity demanded over quantity supplied; buyers cannot purchase the quantities they desire at the current price
Surplus
am excess of quantity supplied over quantity demanded; sellers cannot sell the quantities they desire to supply at the current price
Equilibrium
a situation in which there are no inherent forces that produce change
Law of supply and demand
law stating that in a free market the forces of supply and demand generally push the price toward the level at which quantity supplied and quantity demanded are equal
Price ceiling
a maximum that the price charged for a commodity cannot legally exceed
Price floor
a legal minimum below which the price charged for a commodity is not permitted to fall
