Economics Chapter 3, 4, 5
product markets
The markets in which goods and services are exchanged.
income elasticity of demand
The percentage change in quantity demanded at a specific price divided by the percentage change in income that produced the demand change. A measure of how much the quantity demanded of a good responds to a change in consumers' income, computed as the percentage change in quantity demanded divided by the percentage change in income
equilibrium price
The price in a competitive market at which the quantity demanded and the quantity supplied are equal, there is neither a shortage nor a surplus, and there is no tendency for price to rise or fall.
equilibrium quantity
The quantity supplied and the quantity demanded at the equilibrium price.
price elasticity of supply
The ratio of the percentage change in quantity supplied of a good or service to the percentage change in its price. A measure of how much the quantity supplied of a good responds to a change in the price of that good, computed as the percentage change in quantity supplied divided by the percentage change in price
cross price elasticity of demand
The responsiveness of demand for a good to a change in the price of another good. the percentage change in quantity demanded of one good divided by the percentage change in the price of another good.
complements
Two goods that are bought and used together
change in quantity demanded
a MOVEMENT along the demand curve that occurs in response to a change in PRICE
change in quantity supplied
a change in the amount of a product that producers offer for sale because of a change in the product's price
change in demand
a change in the quantity demanded of a good or service at every price; a shift of the demand curve to the left or right.
inferior good
a good that consumers demand less of when their incomes increase
normal good
a good that consumers demand more of when their incomes increase
supply curve
a graph of the relationship between the price of a good and the quantity supplied
demand curve
a graphic representation of a demand schedule, a graph of the relationship between the price of a good and the quantity demanded
elasticity
a measure of responsiveness that tells us how a dependent variable such as quantity responds to a change in an independent variable such as price
shortage
a situation in which quantity demanded is greater than quantity supplied
surplus
a situation in which quantity supplied is greater than quantity demanded
Law of demand
economic law that states that consumers buy more of a good when its price decreases and less when its price increases
price floor
floor below which prices are not allowed to fall
supply shifter
is a variable that can change the quantity of a good or service supplied at each price.
Demand schedule
table showing quantities of a good or service demanded at different possible prices during a particular period, Ceteris Paribus.
supply schedule
table showing quantities supplied at different prices during a particular period.
Quantity demanded
the amount of a good or service that a consumer is willing and able to purchase at a given price, Ceteris Paribus.
quantity supplied
the amount of a good that sellers are willing and able to sell at a particular price during a particular period, all other things unchanged.
total revenue
the number of units sold multiplied by the average price per unit
price elasticity of demand
the percentage change in quantity demanded divided by the percentage change in price
substitutes
two goods for which an increase in the price of one leads to an increase in the demand for the other
change in supply
A change in the quantity supplied of a good or service at every price; a shift of the supply curve to the left or right.
price ceiling
A legally determined maximum price that sellers may charge
circular flow model
A model that shows the flow of goods and services and the interaction among households, businesses, and banks
price elastic
IF the absolute value of the price elasticity of demand is greater than 1, demand is termed as THIS. Quantity demanded is highly responsive to price changes. Percentage change in quantity dominates. An increase in price will reduce total expenditure; a decrease in price will increase total expenditure.
unit price elastic
If the absolute value of the price elasticity of demand is equal to 1, demand is THIS.
price inelastic
If the absolute value of the price elasticity of demand is less than 1, demand is THIS.
demand shifter
Is a variable that can change the quantity of a good or service demanded at each price.
factor markets
Markets for the factors of production, such as labor, capital, natural resources, and entrepreneurial ability.