Economics chapter 3 Demand and Supply

Complement

A complement is a good that is used in conjunction with another good.

Competitive Market

A market that has many buyers and sellers, so single buyer or seller can influence the price.

Normal Good

A normal good is one for which Demand increases as income increases.

Substitute

A substitute is a good that can be used in place of another good.

Inferior Good

An inferior Good is one for which Demand decreases as income increases.

Supply

If a firm supply a good or service, the firm has the resources and technology to produce it, can profit from producing it, and plans to produce it and sell it. It refers to the entire relationship between the price of a good or service and the quantity supplied of it.

The Law of Supply

Other things remaining the same, the higher the price of a good, the greater is the quantity supplied; and the lower the price of a good, the smaller is the quantity supplied.

Equilibrium Quantity

The Equilibrium Quantity is the quantity bought and sold at the equilibrium price.

Equilibrium Price

The equilibrium price is the price at which quantity demanded equals the quantity supplied.

Money Price

The price of an object is the number of dollars that must be given up in exchange for it.

Quantity Supplied

The quantity supplied of a good or service is the amount that producers plan to sell during a given time period at a particular price.

Change in Demand

When any factor that influence buying plans changes, other than the price of the good, there is a change in demand.

Demand Curve

A Demand Curve shows the relationship between the quantity demanded of a good and its price when all other influences on consumers' planned purchases remain the same. Another way of looking at the demand Curve is as a willingness-and-ability-to-pay curve.

Equilibrium

A situation in which opposing forces balance each other. Equilibrium in a market occurs when the price balances buying plans and selling price.

Supply Curve

A supply curve shows the relationship between the quantity supplied of a good and its price when all other influences on producers' planned sales remain the same.

Demand

If you Demand something, then you want it, can afford it and plan to buy it. It refers to the entire relationship between the price of a good and the quantity demanded of that goods.

Quantity Demanded

The quantity demanded of a good or service is the amount that consumers plan to buy during a given time period at a particular price.

Relative Price

The ratio of one price to another is called a relative price, it is an opportunity cost.

Income Effect

When a price rises, other things remaining the same, the price rises relative to income, people cannot afford to buy all the things they previously bought, they must decrease the quantities demanded of at least some goods and services.

Substitution Effect

When the price of a good rises, other things remaining the same, it's relative price—its opportunity cost—rises. Although each good is unique, it has substitutes—other goods that can be used in its place.

The Law of Demand

Other things remaining the same, the higher the price of a good, the smaller is the quantity demanded; and the lower he price of a good, the greater is the quantity demanded.

Chang in Supply

When any factors that influence selling plans other than the price of the good changes, there is a change in supply.