Economics- Section 2
movement along the demand curve
A change in the quantity demanded of a good that is the result of a change in that good's price.
movement along the supply curve
A change in the quantity supplied of a good arising from a change in the good's price
demand curve
A graphical representation of the demand schedule. It shows the relationship between quantity demanded and price.
Competitive Market
A market in which there are many buyers and sellers of the same good or service, none of whom can influence the price at which the good or service is sold
Two goods are complements if
A rise in the price of one good leads to a decrease in the demand for the other good.
Two goods are substitutes if
A rise in the price of one of the goods leads to an increase in the demand for the other good.
change in demand
A shift of the demand curve, which changes the quantity demanded at any given price.
If an increase in income leads to a decrease in demand, the good is
Inferior
quantity supplied
The actual amount of a good or service people are willing to sell at some specific price.
Which of the following is certainly true if demand and supply increase at the same time?
The equilibrium quantity will increase.
Which of the following is true at equilibrium?
The quantity demanded is the same as the quantity supplied
Supply and demand model
The supply and demand model is a model of how a competitive market works.
It is an inferior good If
When a rise in income decreases the demand for a good
It is a normal good if
When a rise in income increases the demand for a good—the normal case
A decrease in demand leads to:
a fall in both the equilibrium price and the equilibrium quantity.
An increase in supply leads to:
a fall in the equilibrium price and a rise in the equilibrium quantity.
input
a good or service that is used to produce another good or service.
An increase in demand leads to:
a rise in both the equilibrium price and the equilibrium quantity.
A decrease in supply leads to:
a rise in the equilibrium price and a fall in the equilibrium quantity.
change in supply
a shift of the supply curve, which changes the quantity supplied at any given price.
The equilibrium price will rise, but equilibrium quantity may increase, decrease, or stay the same if
demand increases and supply decreases.
An individual demand curve
illustrates the relationship between quantity demanded and price for an individual consumer.
individual supply curve
illustrates the relationship between quantity supplied and price for an individual producer.
The market price of a good will tend to rise if:
it is below the equilibrium price.
law of demand
says that a higher price for a good or service, all other things being equal, leads people to demand a smaller quantity of that good or service.
demand schedule
shows how much of a good or service consumers will want to buy at different prices.
supply schedule
shows how much of a good or service would be supplied at different prices
supply curve
shows the relationship between quantity supplied and price
quantity demanded
the actual amount of a good or service consumers are willing to buy at some specific price.
When supply of a good or service increases:
the equilibrium price of the good or service falls and the equilibrium quantity of the good or service rises.
When supply of a good or service decreases:
the equilibrium price of the good or service rises and the equilibrium quantity of the good or service falls.
law of supply
the general proposition that, all else constant, a higher price leads to higher quantity supplied, and a lower price leads to lower quantity supplied.
An economic situation is in equilibrium if
when no individual would be better off doing something different.
There is a shortage of a good or service
when the quantity demanded exceeds the quantity supplied. Shortages occur when the price is below its equilibrium level.
There is a surplus of a good or service
when the quantity supplied exceeds the quantity demanded. Surpluses occur when the price is above its equilibrium level.