Unit 1 Vocabulary Part 2

Question 1

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

Answer 1

competitive market

Question 2

a model of how a competitive market works

Answer 2

supply and demand model

Question 3

shows how much of a good or service consumers will be willing and able to buy at different prices

Answer 3

demand schedule

Question 4

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`

Answer 4

quantity demanded

Question 5

a graphical representation of the demand schedule; shows the relationship between quantity demanded and price

Answer 5

demand curve

Question 6

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

Answer 6

law of demand

Question 7

a shift of the demand curve, which changes the quantity demanded at any given price

Answer 7

change in demand

Question 8

a change in the quantity demanded of a good that is the result of a change in the good’s price

Answer 8

movement along the demand curve

Question 9

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

Answer 9

substitutes

Question 10

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

Answer 10

complements

Question 11

when a rise in income increases the demand for a good–the normal case–it is a ___.

Answer 11

normal good

Question 12

when a rise in income decreases the demand for a good, it is an ____.

Answer 12

inferior good

Question 13

illustrates the relationship between quantity demanded and price for an individual consumer

Answer 13

individual demand curve

Question 14

the actual amount of a good or service people are willing to sell at some specific price

Answer 14

quantity supplied

Question 15

shows how much of a good or service producers would supply at different prices

Answer 15

supply schedule

Question 16

shows the relationship between the quantity supplied and the price

Answer 16

supply curve

Question 17

says that other things being equal, the price and quantity supplied of a good are positively related

Answer 17

law of supply

Question 18

a shift of the supply curve, which changes the quantity supplied at any given price

Answer 18

change in supply

Question 19

a change in the quantity supplied of a good arising from a change in the good’s price

Answer 19

movement along the supply curve

Question 20

a good or service that is used to produce another good or service

Answer 20

input

Question 21

illustrated the relationship between quantity supplied and price for an individual producer

Answer 21

individual supply curve`

Question 22

no individual would be better off doing something different

Answer 22

equilibrium

Question 23

the price has moved to a level at which the quantity demanded of a good equals the quantity supplied of that good

Answer 23

equilibrium price

Question 24

quantity of the good bought and sold at equilibrium price

Answer 24

equilibrium quantity

Question 25

there is a ___ of a good or service when the quantity supplied exceeds the quantity demanded; price is above equilibrium

Answer 25

surplus

Question 26

there is a ____ of a good or service when the quantity demanded exceeds the quantity supplied; price is below equilibrium

Answer 26

shortage

Question 27

legal restrictions on how high or low a market price may go

Answer 27

price controls

Question 28

a maximum price sellers are allowed to charge for a good/service

Answer 28

price ceiling

Question 29

a minimum price buyers are required to pay for a good/service

Answer 29

price floor

Question 30

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

Answer 30

inefficient allocation to consumers

Question 31

people expend money, effort, and time to cope with the shortages caused by price ceiling

Answer 31

wasted resources

Question 32

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

Answer 32

inefficiency low quality

Question 33

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

Answer 33

black market

Question 34

a legal flloor on the hourly wage rate paid for a worker’s labor

Answer 34

minimum wage

Question 35

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

Answer 35

inefficient allocation of sales among sellers

Question 36

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

Answer 36

inefficiency high quality

Question 37

an upper limit on the quantity of some good that can be bought or sold

Answer 37

quantity control (quota)

Question 38

the price at which consumers will demand that quantity

Answer 38

demand price

Question 39

the price at which producers will supply that quantity

Answer 39

supply price

Question 40

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

Answer 40

wedge

Question 41

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

Answer 41

quota rent

Question 42

gives its owner the right to supply a good or service

Answer 42

license

Question 43

the value of forgone mutually beneficial transactions

Answer 43

deadweight loss