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Micro - Ch. 3
Microeconomics - Ch 3 - Demand and Supply
Term | Definition |
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ceteris paribus | other things being equal |
complements | goods that are often used together so that consumption of one good tends to enhance consumption of the other |
consumer surplus | the extra benefit consumers receive from buying a good or service, measured by what the individuals would have been willing to pay minus the amount that they actually paid |
deadweight loss | the loss in social surplus that occurs when a market produces in inefficient quantity |
demand | the relationship between price and the quantity demanded of a certain good or service |
demand curve | a graphic representation of the relationship between price and quantity demanded of a certain good or service, with quantity on the HORIZONTAL axis and price on the VERTICAL axis |
demand schedule | a table that shows a range of prices for a certain good or service and the quantity demanded at each price |
economic or social surplus | the sum of consumer surplus and producer surplus |
equilibrium | the situation when quantity demanded is equal to the quantity supplied; the combination of price and quantity where there is no economic pressure from surpluses or shortages that would cause price or quantity to change |
equilibrium price | the price where quantity demanded is equal to quantity supplied |
equilibrium quantity | the quantity at which quantity demanded and quantity supplied are equal for a certain price level |
excess demand | at the existing price, the quantity DEMANDED exceeds the quantity SUPPLIED; also called a shortage |
excess supply | at the existing price, quantity SUPPLIED exceeds the quantity DEMANDED; also called a surplus |
factors of production or imputs | the combination of labor, materials, and machinery that is used to produce goods and services; also called inputs |
inferior good | a good in which the quantity demanded falls as income rises, and in which quantity demanded rises and income falls |
law of demand | the common relationship that a higher price leads to a lower quantity demanded of a certain good or service and a lower price leads to a higher quantity demanded, while all other variables are held constant |
law of supply | the common relationship that a higher price leads to a greater quantity supplied and a lower price leads to a lower quantity supplied, while all the variables are held constant |
normal good | a good in which the quantity demanded rises as income rises, and in which quantity demanded falls as income falls |
price | what a buyer pays for a unit of the specific good or service |
price ceiling | a legal maximum price |
price control | government laws to regulate prices instead of letting market forces determine prices |
price floor | a legal minimum price |
producer surplus | the extra benefit producers receive from selling a good or service, measured by the price the producer actually received minus the price the producer would have been willing to accept |
quantity demanded | the total number of units of a good or service consumers are willing to purchase at a given price |
quantity supplied | the total number of units of a good or service producers are willing to sell at a given price |
shift in demand | when a change in some economic factor (other than price) causes a different quantity to be demanded at every price |
shift in supply | when a change in some economic factor (other than price) causes a different quantity to be supplied at every price |
substitute | a good that can replace another to some extent, so that greater consumption of one good can mean less of the other |
supply | the relationship between price and the quantity supplied of a certain good or service |
supply curve | a line that shows the relationship between price and quantity supplied on a graph, with quantity supplied on the HORIZONTAL axis and price of the VERTICAL axis |
supply schedule | a table that shows a range of prices for a good or service at the quantity supplied at each price |