Sections
Key Terms
Key Terms
- 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
- 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 the 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
- equilibrium
- the situation where 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
- 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
- inputs
- the combination of labor, materials, and machinery that is used to produce goods and services; also called factors of production
- 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 other 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
- 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
- shortage
- at the existing price, the quantity demanded exceeds the quantity supplied; also called excess demand
- 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 on the vertical axis
- supply schedule
- a table that shows a range of prices for a good or service and the quantity supplied at each price
- surplus
- at the existing price, quantity supplied exceeds the quantity demanded; also called excess supply
- total surplus
- see social surplus