Section 2 VOCABULARY: SUPPLY AND DEMAND

Question 1

Demand Schedule:

Answer 1

A table that shows the quantity of a good or service that consumers are willing to buy at different prices.

Question 2

Quantity Demanded:

Answer 2

The amount of a good or service that consumers are willing and able to purchase at a specific price.

Question 3

Demand Curve:

Answer 3

A graph that represents the relationship between the price of a good and the quantity demanded. It typically slopes downward, indicating that as prices fall, the quantity demanded increases.

Question 4

Law of Demand:

Answer 4

The principle that, all else being equal, as the price of a good or service decreases, the quantity demanded increases, and vice versa.

Question 5

Change in Demand:

Answer 5

A shift of the entire demand curve to the right (increase) or left (decrease) due to factors other than the good’s price, such as changes in income, preferences, or prices of related goods.

Question 6

Movement Along the Demand Curve:

Answer 6

A change in the quantity demanded of a good due to a change in its price, is represented by a movement from one point to another on the demand curve.

Question 7

Substitutes:

Answer 7

Goods or services that can replace each other. If the price of one substitute rises, the demand for the other substitute typically increases.

Question 8

Complements:

Answer 8

Goods or services that are often used together. If the price of one complement rises, the demand for the other complement usually decreases.

Question 9

Normal Good:

Answer 9

A good for which demand increases as consumer incomes increase and decreases as incomes fall.

Question 10

Inferior Good:

Answer 10

A good for which demand increases as consumer incomes decrease and decreases as incomes increase.

Question 11

Supply Schedule:

Answer 11

A table that shows the quantity of a good or service that producers are willing to sell at different prices.

Question 12

Quantity Supplied:

Answer 12

The amount of a good or service that producers are willing and able to sell at a specific price.

Question 13

Supply Curve:

Answer 13

A graph that shows the relationship between the price of a good and the quantity supplied. It typically slopes upward, indicating that as prices rise, the quantity supplied increases.

Question 14

Law of Supply

Answer 14

: The principle that, all else being equal, as the price of a good or service rises, the quantity supplied increases, and vice versa.

Question 15

Change in Supply:

Answer 15

A shift of the entire supply curve to the right (increase) or left (decrease) due to factors other than the good’s price, such as changes in production technology or input prices.

Question 16

Movement Along the Supply Curve:

Answer 16

A change in the quantity supplied of a good due to a change in its price, represented by a movement from one point to another on the supply curve.

Question 17

Equilibrium:

Answer 17

The point where the supply and demand curves intersect, indicating the price at which the quantity demanded equals the quantity supplied.

Question 18

Market-Clearing Price:

Answer 18

Another term for equilibrium price, where there is no surplus or shortage in the market.

Question 19

Surplus:

Answer 19

A situation where the quantity supplied exceeds the quantity demanded at a given price, leading to downward pressure on prices.

Question 20

Shortage:

Answer 20

A situation where the quantity demanded exceeds the quantity supplied at a given price, leading to upward pressure on prices.

Question 21

Price Ceiling:

Answer 21

A government-imposed limit on how high a price can be charged for a good or service, set below the equilibrium price to make goods more affordable.

Question 22

Price Floor:

Answer 22

A government-imposed limit on how low a price can be charged for a good or service, set above the equilibrium price to ensure producers receive a minimum price.

Question 23

Inefficient Allocation to Consumers:

Answer 23

When goods are not distributed to those who value them the most, often due to price controls like price ceilings.

Question 24

Wasted Resources:

Answer 24

When resources are not used efficiently, often due to imbalances like surpluses or shortages, leading to wasted time or materials.

Question 25

Inefficiently Low Quality:

Answer 25

When the quality of a good or service is lower than what is desired or needed, often due to price ceilings that prevent sellers from charging higher prices.

Question 26

Black Markets:

Answer 26

Illegal markets that arise when price controls lead to shortages. Goods are sold at prices above the official price ceiling.

Question 27

Minimum Wage:

Answer 27

A government-imposed price floor on the wage rate, sets the lowest amount that can be paid for labor, often leading to potential surpluses of labor (unemployment).

Question 28

Inefficient Allocation of Sales Among Sellers:

Answer 28

When some sellers are able to sell goods at higher prices while others cannot, often due to price floors or other controls.

Question 29

Inefficiently High Quality:

Answer 29

When the quality of a good or service is higher than what is demanded, often due to price floors that encourage higher quality than consumers are willing to pay for.

Question 30

Quantity Control or Quota:

Answer 30

A restriction on the amount of a good that can be produced or sold, often leading to reduced market activity and potential inefficiencies.

Question 31

Demand Price:

Answer 31

The price that consumers are willing to pay for a given quantity of a good or service.

Question 32

Supply Price:

Answer 32

The price at which producers are willing to sell a given quantity of a good or service.

Question 33

Wedge:

Answer 33

The difference between the demand price and the supply price due to a quota or other form of quantity control, leading to inefficiencies in the market.

Question 34

Deadweight Loss:

Answer 34

The loss of economic efficiency that occurs when the equilibrium quantity is not achieved or when there are price controls like floors or ceilings. It represents the loss in total surplus due to market distortions.