ch 3. micro

if a surplus exists in a market, we know that the actual price is

above the equilibrium price, and the quantity supplied is greater than the quantity demanded

in general the term ceteris paribus means

all else equal

market price is determined by

both supply and demand

the necessity of holding all variables other than price constant in constructing a demand curve

ceteris paribus condition

difference in change in supply and quantity supplied

change in supply is a shift change in quantity supplied is movement

goods and services that are consumed together, consumers buy 1, consumers buy the other too

complements

when there is a shortage of a good

consumers compete against one another by bidding the price upward.

a change in demand refers to a shift of the

demand curve

surplus place what kind of pressure on price

downward

shifts in the demand curve

income price of related goods tastes and preferences population and demographics expected future costs

according to the law of supply

increase in price causes increase in quantity supplied, decrease in price causes decrease in quantity supplied

supply schedule

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

supply curve

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

law of supply

a increase in price causes a increase in quantity supplied, decrease in price causes a decrease in the quantity supplied

what do econmists mean by market equlibrium?

a market outcome where quantity supplied is equal to quantity demanded

a perfectly competitive market is a market that meets the conditions of

many buyers and sellers all firms selling identical products no barriers to new firms entering the market

a change in quantity demanded refers to a

movement along the demand curve as a result of a change in the products price

law of supply

positive relationship between price and quantity supplied

causes of supply shifts

prices of imputs technological change prices of substitutes in production

to calculate surplus subtract

quantity demanded from quantity supplied

to calculate shortage subtract

quantity supplied from quantity demanded

goods and services that can be used for the same purpose, the more consumers buy of 1, the less they will buy of another

substitutes

distinction between substitutes and complements

substitutes are used for the same purposes, complements are used together

when economists speak of a surplus, they mean a situation in which

the market price is above equilibrium price firms have unsold goods piling up the quantity supplied exceeds quantity demanded

the law of demand is the assertion that

the quantity demanded of a product is inversely related to its price

an increase in the price of a product causes a decrease in quantity demanded because of the income and substitution effects. more specifically,

the substitution effect is the decrease in quantity demanded because the product is more expensive relative to other goods and the income effect is the decrease in quantity demanded owing to the decline in​ consumers' purchasing power

according to the law of demand

there is an inverse relationship between price and quantity demanded

law of demand

when the price of a good falls, quantity demanded increases when the prices rises, the quantity demanded decreases