Chapter 5-6 economics

Law of demand

A microeconomic law that states, all other factors being equal, as the price of a good or service increases, consumer demand for the good or service will decrease, and vice versa.

Change in demand

A term used in economics to describe that there has been a change, or shift in, a market's total demand. This is represented graphically in a price vs. quantity plane, and is a result of more/less entrants into the market, and the changing of consumer preferences.

Excess demand

Excess demand is created when price is set below the equilibrium price. Because the price is so low, too many consumers want the good while producers are not making enough of it. In this situation, at price P1, the quantity of goods demanded by consumers at this price is Q2.

Market demand

For example, market demand is the total of what everybody in the market wants. Businesses often spend a considerable amount of money in order to determine the amount of demand that the public has for its products and services.

Complementary good

In economics, a complementary good is a good with a negative cross elasticity of demand, in contrast to a substitute good. This means a good's demand is increased when the price of another good is decreased.

Excess supply

In economics, excess supply (also called surplus) is a situation in which the quantity of a good or service supplied is more than the quantity demanded, and the price is above the equilibrium level determined by supply and demand.

Market clearing price

In economics, market clearing is a simplifying assumption made by new classical economics that in any given market, prices and resulting volumes always adjust up or down such that quantity supplied at the market-clearing price equals the quantity demanded at the market-clearing price.

Market equilibrium

Market equilibrium is a market state where the supply in the market is equal to the demand in the market. The equilibrium price is the price of a good or service when the supply of it is equal to the demand for it in the market.

Inelastic

Not elastic

Price ceiling

Price ceiling is a situation when the price charged is more than or less than the equilibrium price determined by market forces of demand and supply. Definition: Price ceiling is a situation when the price charged is more than or less than the equilibrium price determined by market forces of demand and supply.

Price floor

Price floor is a situation when the price charged is more than or less than the equilibrium price determined by market forces of demand and supply. Definition: Price floor is a situation when the price charged is more than or less than the equilibrium price determined by market forces of demand and supply.

Quantity demanded

Quantity demanded is the quantity of a commodity that people are willing to buy at a particular price at a particular point of time. Definition: Quantity demanded is the quantity of a commodity that people are willing to buy at a particular price at a particular point of time.

Quantity supplied

Quantity supplied is the quantity of a commodity that producers are willing to sell at a particular price at a particular point of time. Definition: Quantity supplied is the quantity of a commodity that producers are willing to sell at a particular price at a particular point of time.

Supply

Something available to someone

Market supply

Supply is defined as the quantity of a product that a producer is willing and able to supply onto the market at a given price in a given time period. Note: Throughout this study companion, the terms firm, business, producer and seller have the same meaning.

Law of supply

The law of supply is a fundamental principle of economic theory which states that, all else equal, an increase in price results in an increase in quantity supplied. In other words, there is a direct relationship between price and quantity: quantities respond in the same direction as price changes.

Change in quantity demand

The only effect of a change in the price of the product is to move from one point on the demand curve to another point on the demand curve. So a "change in quantity demanded" is shown on the graph as a movement from one point on a demand curve to another point on the same demand curve.

Shortage

When a product can't be made to the demand

Disequilibrium

a loss or lack of equilibrium or stability, especially in relation to supply, demand, and prices.

Surplus

an amount of something left over when requirements have been met; an excess of production or supply over demand.

Demand

an insistent and peremptory request, made as if by right.

Rent control

government control and regulation of the amounts charged for rented housing.

Elastic

(of an object or material) able to resume its normal shape spontaneously after contraction, dilatation, or distortion.

Change in quantity supplied

A change in quantity supplied refers to a movement along a given supply curve. A change in quantity supplied is brought about only by a change in a good's price.

Change in supply

A change in the price of a good or service, holding all else constant, will result in a movement along the supply curve. A change in the cost of an input will impact the cost of producing a good and will result in a shift in supply; supply will shift outward if costs decrease and will shift inward if they increase.