Chapter 4: The Market Forces of Supply and Demand

21 terms by veekee

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market

a group of buyers and sellers of a particular good or service

competitive market

a market in which there are many buyers and sellers so that each has a negligible impact on the market price

quantity demanded

the amount of a good that buyers are willing and able to purchase

law of demand

the claim that, other things equal, the quantity demanded of a good falls when the price of the good rises

normal good

a good for which, other things equal, an increase in income leads to an increase in demand

inferior good

a good for which, other things equal, an increase in income leads to a decrease in demand

substitutes

two goods for which an increase in the price of one leads to an increase in the demand for the other

complements

two goods for which an increase in the price of one leads to a decrease in the demand for the other

demand schedule

a table that shows the relationship between the price of a good and the quantity demanded

demand curve

a graph of the relationship between the price of a good and the quantity demanded

ceteris paribus

a Latin phrase, translated as "other things being equal," used as a reminder that all variables other than the ones being studied are assumed to be constant

quantity supplied

the amount of a good that sellers are willing and able to sell

law of supply

the claim that, other things equal, the quantity supplied of a good rises when the price of the good rises

supply schedule

a table that shows the relationship between the price of a good and the quantity supplied

supply curve

a graph of the relationship between the price of a good and the quantity supplied

equilibrium

a situation in which supply and demand have been brought into balance

equilibrium price

the price that balances supply and demand

equilibrium quantity

the quantity supplied and the quantity demanded when the price has adjusted to balance supply and demand

surplus

a situation in which quantity supplied is greater than quantity demanded

shortage

a situation in which quantity demanded is greater than quantity supplied

law of supply and demand

the claim that the price of any good adjusts to bring the supply and demand for that good into balance

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