1.2 The Market

Question 1

Demand

Answer 1

Amount of a good that consumers are willing and able to buy at a given price

Question 2

Supply

Answer 2

Quantity of a good or service that a producer is willing and able to make available on the market, at a given price

Question 3

Equilibrium Price

Answer 3

Price at which the amount supplied is equal to the amount demanded

Question 4

Surplus / excess supply

Answer 4

Supply exceeds demand

Question 5

Shortage / excess demand

Answer 5

Demand exceeds supply

Question 6

Price elasticity of demand

Answer 6

Measures the responsiveness of demand to a change in price

Question 7

Elastic Demand

Answer 7

Consumer demand is sensitive to changes in price

Question 8

Inelastic Demand

Answer 8

Changes in prices will have little or no effect on the amount demanded

Question 9

Income elasticity of demand

Answer 9

Measures the responsiveness of demand to changes in income

Question 10

Necessity good

Answer 10

Good which demand increases when income increases

Question 11

Inferior Good

Answer 11

Good which demand decreases when income increases

Question 12

Luxury Good

Answer 12

Good which demand increases more than proportionally as income increases