29 terms

Bus Econ Chap 7 Terms

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demand
the amount of a good or service that consumers are able and willing to buy at various possible prices during a specified time period
supply
the amount of a good or service that producers are able and willing to sell at various prices during a specified time period
market
the process of freely exchanging goods and services between buyers and sellers
voluntary exchange
a transaction in which a buyer and a seller exercise their economic freedom by working out their own terms of exchange
law of demand
economic rule stating that the quantity demanded and price move in opposite directions
quantity demanded
the amount of a good or service that a consumer is willing and able to purchase at a specific price
real income effect
economic rule stating that individuals cannot keep buying the same quantity of a product if its price rises while their income stays the same
substitution effect
economic rule stating that if two items satisfy the same need and the price of one rises, people will buy more of the other
utility
the ability of any good or service to satisfy consumer wants
marginal utility
an additional amount of satisfaction
law of diminishing marginal utility
rule stating that the additional satisfaction a consumer gets from purchasing one more unit of a product will lessen with each additional unit purchased
demand schedule
table showing quantities demanded at different possible prices
demand curve
downward sloping line that shows in graph form the quantities demanded at each possible price
elasticity
economic concept dealing with consumers' responsiveness to an increase or decrease in the price of a product
price elasticity of demand
economic concept that deals with how much demand varies according to changes in price
elastic demand
situation in which a given rise or fall in a product's price greatly affects the amount that people are willing to buy
inelastic demand
situation in which a product's price change has little impact on the quantity demanded by consumers
law of supply
economic rule stating that price and quantity supplied move in the same direction
quantity supplied
the amount of a good or service that a producer is willing and able to supply at a specific price
supply schedule
table showing quantities supplied at different possible prices
supply curve
upward sloping line that shows in graph form the quantities supplied at each possible price
technology
the use of science to develop new products and new methods for producing and distributing goods and services
law of diminishing returns
economic rule that says as more units of a factor of production are added to other factors of production, after some point total output continues to increase but at a diminishing rate
equilibrium price
the price at which the amount producers are willing to supply is equal to the amount consumers are willing to buy
shortage
situation in which the quantity demanded is greater than the quantity supplied at the current price
surplus
situation in which quantity supplied is greater than quantity demanded at the current price
price ceiling
a legal maximum price that may be charged for a particular good or service
price floor
a legal minimum price below which a good or service may not be sold
rationing
the distribution of goods and services based on something other than price