Week 2 - Market Forces of Supply & Demand Flashcards
What is supply and demand?
are the forces that make market economies work, determining the quantity of each good produced and the price at which it is sold.
What is a market?
is a group of buyers and sellers of a particular good or service.
What is a competitive market?
is a market in which there are many buyers and many sellers so that each has a negligible impact on the market price.
What do you call it when there’s only one seller in the market, that sets the price?
a monopoly
What is the quantity demanded?
is the amount of a good that buyers are willing and able to purchase.
What is the law of demand?
is the claim that, other things being equal, the quantity demanded of a good falls when the price of the good rises.
What is a demand schedule?
is a table that shows the relationship between the price of a good and the quantity demanded.
What is the demand curve?
is a graph of the relationship between the price of a good and the quantity demanded.
When is a good considered to be a normal good (in terms of microeconomics)? Give examples?
If the demand for something falls when income falls. Examples include high-end furniture and electronics.
When is a good considered to be an inferior good (in terms of microeconomics)? Give examples?
If the demand for something rises when income falls. An example might be bus rides, as you’re less likely to buy a car or use Uber.
What are substitutes in terms of microeconomics?
is where 2 goods for which a decrease in the price of one good leads to a decrease in the demand for the other good.
What are complements in terms of microeconomics?
are 2 goods for which a decrease in the price of one good leads to an increase in the demand for the other good.
What is the quantity supplied?
is the amount of a good that sellers are willing and able to sell.
What is the law of supply?
is the claim that, other things being equal, the quantity supplied of a good rises when the price of the good rises.
What is supply schedule?
is a table that shows the relationship between the price of a good and the quantity supplied.
What is the supply curve?
is a graph of the relationship between the price of a good and the quantity supplied.
What is equilibrium in terms of microeconomics?
is a situation in which supply and demand have been brought into balance.
What is the equilibrium price?
is the price that balances quantity supplied and quantity demanded.
What is the equilibrium quantity?
is the quantity supplied and the quantity demanded at the equilibrium price.
What is a surplus in terms of microeconomics?
is a situation in which quantity supplied is greater than quantity demanded.
What is a shortage in terms of microeconomics??
is a situation in which quantity demanded is greater than quantity supplied.
What is the law of supply and demand?
is the claim that the price of any good adjusts to bring the supply and demand for that good into balance.
Define willingness to pay in terms of microeconomics?
the maximum amount that a buyer will pay for a good. This is a measure of how much the buyer values the good or service.
Define consumer surplus?
is the buyer’s willingness to pay for a good minus the amount the buyer actually pays for it.
