| Term | Definition |
|---|
| demand | a schedule showing the amounts of a good or service that buyers (or a buyer) wish to purchase at various prices during some time period. |
| law of demand | the principle that, other things equal, an increase in a product's price will reduce the quantity of it demanded, and conversely for a decrease in price. |
| diminishing marginal utility | the principle that as a consumer increases the consumption of a good or service, the marginal utility obtained from each additional unit of the good or service decreases. |
| income effect | a change in the quantity demanded of a product that results from the change in real income (purchasing power) caused by a change in the product's price. |
| substitution effect | a change in the quantity demanded of a consumer good that results from a change in tis relative expensiveness caused by a change in the product's price. |
| demand curve | a curve illustrating demand. |
| determinants of demand | factors other than price that determine the quantities demanded of a good or service |
| normal good | a good or service whose consumption increases when income increases and falls when income decreases, price remaining constant. |
| inferior good | a good or service whose consumption declines as income rises (and conversely), price remaining constant |
| substitute goods | products or services thatcan be used in place of each other. When the price of one falls, the demand for the other product falls; conversely, when the price of one product rises, the demand for the other product rises. |
| complementary goods | products and services that are used together. When the price of one falls, the demand for the other increases (and conversely) |
| 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. |
| change in quantity demanded | a change in the amount of a product that consumers are willing and able to purchase because of a change in the product's price. |
| supply | a schedule showing the amounts of a good or service that sellers (or a seller) will offer at various prices during some period. |
| law of supply | the principle that, other things equal, an increase in the price of a product will increase the quantity of it supplied, and conversely for a price decrease. |
| supply curve | a curve illustrating supply |
| determinants of supply | factors other than price that determine the quantities supplied of a good or service. |
| 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. |
| change in quantity supplied | a change in the amount of a product that producers offer for sale because of a change in the price |
| 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 the price to rise or fall. |
| equilibrium quantity | the quantity demanded and supplied at the equilibrium price in a competitive market. |
| surplus | the amount by which the quantity supplied of a product exceeds the quantity demanded at a specific (above-equilibrium) price. |
| shortage | the amount by which the quantity demanded of a product exceeds the quantity supplied at a particular (below-equilibrium) price. |
| productive efficiency | the production of a good in the least costly way; occurs when a production takes place at the output at which average total cost is a minimum and marginal product per dollar's worth of input is the same for all inputs. |
| allocative efficiency | the apportionment of resources among firms and industries to obtain the production of the products most wanted by society (consumers); the output of each product at which its marginal cost and price or marginal benefit are equal. |
| price ceiling | a legally established maximum price for a good or service. |
| price floor | a legally determined minimum price above the equilibrium price. |
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