29 terms


Factors of production, used by firms as inputs in the production process.
opportunity cost
Cost of the next best alternative use of money, time, or resources when one choice is made rather than another, the most desirable alternative given up as the result of a decision
The amount of a good or service that producers are willing and able to produce and sell at a certain price
quantity demanded
The amount of a good or service that a consumer is willing and able to purchase at a given price
All the businesses that make one kind of product or offer a certain type of good or service.
quantity supplied
The amount of a good or service that a firm is willing and able to supply at a given price
equilibrium quantity
The amount of output at which the quantity supplied is equal to the quantity demanded; i.e., there is no surplus or shortage.
market supply curve
A graph that shows the various amounts offered by all firms in the market over a range of possible prices.
excess supply
The difference between quantity supplied and quantity demanded. A surplus
excess demand
The difference between quantity supplied and quantity demanded. A shortage
When quantity demanded is greater than the quantity supplied in the market.
When quantity supplied is greater than the quantity demanded in the market.
consumer sovereignty
The idea that consumers ultimately dictate what will be produced (or not produced) by choosing what to purchase (and what not to purchase). Thus, businesses allocate resources to produce goods and services in accordance with the needs and wants of consumers.
ceteris paribus
A Latin phrase that means "all other things held constant"
competitive market
Where market demand is equal to market supply within a competitive market.
competitive market
A market with a large number of buyers and of sellers, such that no single buyer or seller is able to influence the price or any other aspect of the market - no one has any market control.
consumer surplus
The extra amount that a consumer is willing to pay for a product above the price that is actually paid.
producer surplus
Refers to the difference between the price received by firms for selling their goods and services and the lowest price firms are willing to receive to produce the good or service.
consumer welfare
The benefit obtained from consuming goods and services.
producer welfare
The benefit obtained by producers from supplying a good or service usually measured in terms of total revenues and/or profitability.
equilibrium price
The price at which the quantity demanded equals the quantity supplied, and there is no shortage or surplus within the market.
market demand
The sum of all individual consumer demand for a good or service.
market supply
The sum of all that is supplied each period by all individual producers within an industry.
social surplus
The sum of consumer and producer surplus.
The benefit that is gained from producing and consuming goods and services.
The point at which quantity demanded and quantity supplied are equal.
The process of creating goods and services.
allocative efficiency
A state of the economy in which production represents consumer preferences; in particular, every good or service is produced up to the point where the last unit provides a marginal benefit to consumers equal to the marginal cost of producing.
Describes any price or quantity not at equilibrium; when quantity supplied is not equal to quantity demanded in a market.