Chapter 4- Market Forces of Supply and Demand Flashcards
Market
a group of buyers and sellers of a particular good or service
Competitive Market
a market in which there are many buyers and many sellers so that each has a negligible impact on the market price
Perfectly Competitive
Must have two characteristics;
1) The goods offered for sale are all exactly the same
2) The buyers and sellers are so numerous that no single buyer or seller has any influence over the market price
Monopoly
only one seller and this seller sets the price
Quantity Demand
the amount of a good that buyers are willing and able to purchase
Law of Demand
the claim that, other things being equal, the quantity demanded of a good falls when the price of the good rises
Demand Schedule
a table that shows the relationship between the price of a good and the quantity demanded
Demand Curve
a graph of the relationship between the price of a good and the quantity demanded
Market Demand
the sum of all the individual demands for a particular good or service
An increase in demand results in….
a shift of the demand curve to the right
A decrease in demand results in……….
a shift of the demand curve to the left, because the quantity demanded has been reduced
A Normal Good
means that when the income falls, the demand for a good falls
Normal Good
a good for which an increase in income leads to an increase in demand
Inferior Good
a good for which an increase in income leads to a decrease in demand
Substitutes
two goods for which an increase in the price of one leads to an increase in demand for the other
Complements
two goods for which an increase in the price of one leads to a decrease in the demand for the other
often pairs that are used together; -gasoline & cars
The demand curve shows…
what happens to the quantity demanded of a good when its price varies,
when one of these other variables changes, the demand curve shifts
Quantity Supplied
the amount of a good that sellers are willing and able to sell
Law of Supply
the claim that the quantity supplied of a good rises when the price of the good rises
Supply Schedule
a table that shows the relationship between the price of a good and the quantity supplied
Supply Curve
a graph of the relationship between the price of a good and the quantity supplied
Increase in Supply=
a shift in the supply curve to the right
Decrease in Supply=
a shift in the supply curve to the left
Equilibrium
a situation in which the market price has reached the level at which quantity supplied equals quantity demanded
