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elasticity of demand

a measure of how people change their buying patterns when prices change

ceteris paribus

latin phrase "all other things held constant"

substitution effect

what happens when consumers react to an increase in a goods price by consuming less of that good and more of other goods

demand curve

graphic representation of a demand schedule

law of demand

a way that a change of price determines whether or not a consumer buys goods

inferior good

a good that consumers demand less of when income increases

complements

a good that is always used with an other good

normal good

a good that consumers will demand more of when their income increases

substitutes

a good that replaces another demand good

total revenue

the amount of money a company receives by selling goods and services

marginal costs

the cost of producing one more unit of a good

total cost

fixed costs plus variable costs

marginal revenue

the additional income from selling one more unit of a good

supply schedule

a chart that lists how much of a good a supplier will offer at different prices

variable

a factor that can change

regulation

government intervention in a market that affects the production of a good

marginal product of labor

the change in output from hiring on additional unit of labor

quantity supplied

the amount a supplier is willing and able to supply at a certain price

increasing marginal returns

a level at which the marginal production goes up with new investment

market supply curve

a graph of the quantity supplied of a good by all suppliers at different prices

rent control

government may hold down the price of apartments with...

disequilibrium

inequality between quantities supplied and demanded results in market...

supply

problem created when quantity supplied exceeds demand is excess...

price ceiling

government-imposed maximum charge for a good is a(n)...

surplus

quantities supplied in excess of quantities demanded result in a(n)...

price floor

government-imposed minimum for a good or service is a(n)...

equilibrium

when supply and demand meet at a particular price, the market is said to be at...

shortage

quantities demanded in excess of quantities supplied create a(n)...

rationing

dividing up scarce goods and services without concern for prices defines...

supply shock

economists call a sudden shortage of goods...

demand

problem created when quantity demanded exceeds supply is excess...

perfect competition

simplest market structure

oligopoly

market structure dominated by a few large profitable firms

deregulation

when government no longer decides each company's market role and pricing

license

grants firms control over scarce resources

barrier to entry

can cause difficulties in getting into the market

franchise

firm's right to sell its goods within an exclusive market

commodity

a product that is the same regardless of who makes or sells it

merger

joining of one firm with another to form a single firm

patent

exclusive rights to sell a new good or service for a specific period of time

start-up costs

expenses of a new business before product reaches the customer

natural monopoly

market structure that characterizes an industry run most efficiently by one large firm

collusion

oligopoly members' agreement on price and output

cartel

formal organization of producers that sets price and output

monopoly

single supplier in a given market

nonprice competition

competition based on differences other that pricing among products

price discrimination

charging special groups different prices

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