| market | an institution or mechanism that brings together buyers (demanders) and seller (suppliers) of particular goods, services, or resources |
| demand | quantity of a product/resource that consumers/businesses are “willing and able” to purchase at various possible prices at a specific time, other things equal |
| demand schedule | table representing demand |
| law of demand | all else equal, as (relative) price falls, the quantity demanded rises, and as (relative) price rises, the quantity demanded falls (negative/inverse relationship) |
| diminishing marginal utility | successive units of a particular product yield less and less marginal utility |
| determinants of demand (list 5) | 1. preferences 2. # of consumers in market 3. consumer’s incomes 4. prices of related goods 5. consumer expectations of future prices and incomes |
| normal goods (superior goods) | goods whose demand varies directly with money income |
| inferior goods | goods whose demand varies inversely with money income |
| substitute goods | goods that can be used in place of other goods (Colgate/Crest, Toyota/Honda) |
| complementary goods | goods that are used together with others, usually demanded together. Price of one good goes up, demand for other goes down (gas/motor oil, tuition/textbooks) |
| independent goods | the price of one good does not affect the demand of the other (butter/golf balls) |
| change in demand | shift of the entire demand curve to right or left |
| change in quantity demanded | movement from one point to another point on a fixed demand schedule or demand curve |
| supply | quantity of a product/resource that households/businesses are “willing and able” to sell at various possible prices (revenues) at a specific time, other things equal |
| law of supply | as price (revenue) rises, the quantity supplied rises; as price (revenue) falls, the quantity supplied falls |
| supply schedule | table representing supply |
| supply curve (impl) | upward slope represents direct relationship between price (revenue) and quantity supplied |
| determinants of supply (supply shifters) | factors other than price (revenue) that will influence quantities supplied. assumed to be constant when supply curve is drawn. a change in these will result in a shift in the curve to the right or left |
| determinants of supply (list 6) | 1. resource prices 2. technology 3. taxes and subsidies 4. prices of other goods 5. price expectations 6. # of sellers in the market |
| change in supply | change in the entire schedule and a shift of the entire curve right or left. cause is a change in one or more determinant of supply. |
| change in quantity supplied | movement from one point to another on a fixed supply curve. cause is change in price of specific product considered |
| surplus | excess supply. difference between quantity supplied and quantity demanded |
| shortage | excess demand. difference between quantity demanded and quantity supplied |
| equilibrium price (market clearing) | price at which there is no shortage or surplus. graphically, the intersection of supply and demand curves |
| equilibrium quantity | quantity at which there is no shortage or surplus. graphically, the intersection of supply and demand curves |
