Economics Chapter 3

Movement Along the Supply Curve

A change in the quantity supplied of a good that results from a change in that price of that good.

Equilibrium Price

The price at which the market is in equilibrium, that is, the quantity of a good or service demanded equals the quantity of that good or service supplied; also referred to as the market-clearing price.

Movement Along the Demand Curve

A change in the quantity demanded of a good that results from a change in the price of that good.

Inferior good

A good for which a rise in income decreases the demand for the good.

Supply Curve

A graphical representation of the supply schedule, showing the relationship between quantity supplied and price.

Surplus

The excess of a good or service that occurs when the quantity supplied exceeds the quantity demanded; surpluses occur when the price is above the equilibrium price.

Shortage

The insufficiency of a good or service that occurs when the quantity demanded exceeds the quantity supplied; shortages occur when the price is below the equilibrium price.

Market-Clearing Price

The price at which the market is in equilibrium, that is, the quantity of a good or service demanded equals the quantity of that good or service supplied; also referred to as the equilibrium price.

Equilibrium Quantity

The quantity of a good or service bought and sold at the equilibrium (or market-clearing).

Normal good

A good for which a rise in income increases the demand for that good--the "normal" case.

Input

A good or service used to produce another good or service.

Competitive Market

A market in which there are many buyers sellers of the same good or service, none of whom can influence price at which the good or service is sold.

Shift of the Supply Curve

A change in the quantity supplied of a good or service at any given price, represented graphically by the change of the original supply curve to a new position, denoted by a new supply curve.

Law of Demand

A higher price for a good or service, other things equal, leads people to demand a smaller quantity of that good or service.

Quantity Supplied

The actual amount of a good or service producers are willing to sell at some specific price.

Quantity Demanded

The actual amount of a good or service consumers are willing to buy at some specific price.

Shift of the Demand Curve

A change in the quantity demanded at any given price, represented graphically by the change of the original demand curve to a new position, denoted by a new demand curve.

Demand Curve

A graphical representation of the demand schedule, showing the relationship between quantity demanded and price.

Individual Demand Curve

A graphical representation of the relationship between quantity demanded and price for an individual consumer.

Individual Supply Curve

A graphical representation of the relationship between quantity supplied and price for an individual producer.

Demand Schedule

A list or table showing how much of a good or service consumers will want to buy at different prices.

Supply Schedule

A list or table showing how much of a good or service producers will supply at different prices.

Supply and Demand Model

A model of how a competitive market works.

Complements

Pairs of goods for which a rise in the price of one good leads to a decrease in demand for the other good.

Substitutes

Pairs of goods for which a rise in the price of one of the goods leads to an increase in the demand for the other good.