Economics chapter 3

Market Equilibrium

A situation in which quantity demanded equals quantity supplied.

What is a supply schedule?

shows the supply of something at a certain price.

What does the demand curve show a relationship between?

Price and demand

Market Demand

The demand by all the consumers of a given good or service.

What is the difference between an increase in demand and an increase in quantity demanded?

Increase in demand is the increase of consumers wanting to purchase the product while an increase in quantity demanded is an increase of all demands at any given time

What does the law of demand imply?

Lower price, more demand, vice versa

Complement

Goods and services that are used together

Substitutes

Goods and services that can be used for the same purpose.

What does the phrase "demand has increased" mean?

People want more of a product

What variable or variables can cause a change in market demand of a product?

Price change

Quantity Demanded

The amount of a good or service that a consumer is willing and able to purchase at a given price.

Quantity Supplied

The amount of a good or service that a firm is willing and able to supply at a given price.

Substitution Effect

The change in the quantity demanded of a good that results from a change in price, making the good more or less expensive relative to other goods that are substitutes.

Income Effect

The change in the quantity demanded of a good that results from the effect of a change in the good's price on consumers' purchasing power.

Demographics

The characteristics of a population with respect to age, race, and gender.

Surplus

A situation in which the quantity supplied is greater than the quantity demanded.

Demand Curve

A curve that shows the relationship between the price of a product and the quantity of the product demanded

Supply Curve

A curve that shows the relationship between the price of a product and the quantity of the product supplied.

Inferior Good

A good for which the demand increases as income falls and decreases as income rises

Normal Good

A good for which the demand increases as income rises and decreases as income falls.

Competitive Market equilibrium

A market equilibrium with many buyers and many sellers.

Perfectly Competitive Market

A market that meets the conditions of many buyers and sellers, all firms selling identical products, and no barriers to new firms entering the market.

What can cause a movement along the demand curve?

A movement on the demand curve is caused by a change in the price.

Technological Change

A positive or negative change in the ability of a firm to produce a given level of output with a given quantity of inputs.

What causes a shift of the demand curve?

A shift of the demand curve can be caused by a decrease in price of a substitute or an increase in price of a compliment.

Shortage

A situation in which the quantity demanded is greater than the quantity supplied.

Demand Schedule

A table that shows the relationship between the price of a product and the quantity of the product demanded

Supply Schedule

A table that shows the relationship between the price of a product and the quantity of the product supplied

Law of Supply

The rule that, holding everything else constant, increases in price cause increases in the quantity supplied, and decreases in price cause decreases in the quantity supplied.

Law of Demand

The rule that, holding everything else constant, when the price of a product falls, the quantity demanded of the product will increase, and when the price of a product rises, the quantity demanded of the product will decrease

What is the difference between an increase in supply and an increase in quantity supplied?

When it is an increase in supply, the supply curve shifts to the right. At every possible price, a greater quantity is supplied. An increase of quantity supplied means that the price of the product increases and there has been a movement from one point on the supply curve to another point further up on the curve.

What is an income effect of a price change on good?

You will either have more income than before or less income

Competitive market

a market with many buyers and sellers of the same product(s)