Unit 1 Vocabulary Part 2 Flashcards
a market in which there are many buyers and sellers of the same good or service, none of whom can influence the price at which the good or service is sold
competitive market
a model of how a competitive market works
supply and demand model
shows how much of a good or service consumers will be willing and able to buy at different prices
demand schedule
the actual amount of a good or service consumers are willing and able to buy at some specific price; shown as a single point in a demand schedule or along a demand curve`
quantity demanded
a graphical representation of the demand schedule; shows the relationship between quantity demanded and price
demand curve
says that a higher price for a good or service, all other things being equal, leads people to demand a smaller quantity of that good or service
law of demand
a shift of the demand curve, which changes the quantity demanded at any given price
change in demand
a change in the quantity demanded of a good that is the result of a change in the good’s price
movement along the demand curve
two goods are ____ if a rise in the price of one of the goods leads to an increase in the demand for the other good
substitutes
two goods are ____ if a rise in the price of one of the goods leads to a decrease in the demand for the other good
complements
when a rise in income increases the demand for a good–the normal case–it is a ___.
normal good
when a rise in income decreases the demand for a good, it is an ____.
inferior good
illustrates the relationship between quantity demanded and price for an individual consumer
individual demand curve
the actual amount of a good or service people are willing to sell at some specific price
quantity supplied
shows how much of a good or service producers would supply at different prices
supply schedule
shows the relationship between the quantity supplied and the price
supply curve
says that other things being equal, the price and quantity supplied of a good are positively related
law of supply
a shift of the supply curve, which changes the quantity supplied at any given price
change in supply
a change in the quantity supplied of a good arising from a change in the good’s price
movement along the supply curve
a good or service that is used to produce another good or service
input
illustrated the relationship between quantity supplied and price for an individual producer
individual supply curve`
no individual would be better off doing something different
equilibrium
the price has moved to a level at which the quantity demanded of a good equals the quantity supplied of that good
equilibrium price
quantity of the good bought and sold at equilibrium price
equilibrium quantity
there is a ___ of a good or service when the quantity supplied exceeds the quantity demanded; price is above equilibrium
surplus
there is a ____ of a good or service when the quantity demanded exceeds the quantity supplied; price is below equilibrium
shortage
legal restrictions on how high or low a market price may go
price controls
a maximum price sellers are allowed to charge for a good/service
price ceiling
a minimum price buyers are required to pay for a good/service
price floor
people who want the good badly and are willing to pay a high price don’t get it, and those who care relatively little about the good and are only willing to pay a relatively low price do get it
inefficient allocation to consumers
people expend money, effort, and time to cope with the shortages caused by price ceiling
wasted resources
the goods being offered are of ____: sellers offer low quality goods at a low price even though buyers would prefer a higher quality at a higher price
inefficiency low quality
a market in which goods or services are bought and sold illegally-either because it is illegal to sell them at all or because the prices charged are legally prohibited by a price ceiling
black market
a legal flloor on the hourly wage rate paid for a worker’s labor
minimum wage
price floors lead to ____: those who would be willing to sell the good at the lowest price are not always those who manage to sell it
inefficient allocation of sales among sellers
price floors often lead to inefficiency in that goods of ____ are offered: sellers offer high-quality goods at a high price, even though buyers would prefer a lower quality at a lower price
inefficiency high quality
an upper limit on the quantity of some good that can be bought or sold
quantity control (quota)
the price at which consumers will demand that quantity
demand price
the price at which producers will supply that quantity
supply price
a quantity control, or quota, drive a ____ between the demand price and the supply price of a good; that is, the price paid by buyers ends up being higher than the received by sellers
wedge
the difference between the demand and supply price at the quota amount is the ____, the earnings that accrue to the license-holder from ownership of the right to sell the good. It is equal to the market price of the license when the licenses are traded
quota rent
gives its owner the right to supply a good or service
license
the value of forgone mutually beneficial transactions
deadweight loss
