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Market

All of the arrangements that individuals have for exchanging with one another. Thus, for example, we can speak of the labor market, the automobile market, and the credit market.

1

Demand

A schedule showing how much of a good or service people will purchase at any price during a specified time period, other things being constant.

2

Law of demand

The observation that there is a negative, or inverse, relationship between the price of any good or service and the quantity demanded, holding other factors constant.

3

Relative price

The money price of one commodity divided by the money price of another commodity; the number of units of one commodity that must be sacrificed to purchase one unit of another commodity.

4

Money price

The price expressed in today's dollars; also called the absolute or nominal price.

5

Demand curve

A graphical representation of the demand schedule. It is a negatively sloped line showing the inverse relationship between the price and the quantity demanded (other things being equal).

6

Market demand

The demand of all consumers in the marketplace for a particular good or service. The summation of each price of the quantity demanded by each individual.

7

Ceteris paribus condition

Determinants of the relationship between price and quantity that are unchanged along the curve. Changes in these factors cause the curve to shift.

8

Normal goods

Goods for which demands rises as income rises. Most goods are normal goods.

9

Inferior goods

Goods for which demand falls as income rises.

10

Substitutes

Two goods are substitutes when a change in the price of one causes a shift in demand for the other in the same direction as the price change.

11

Supply

A schedule showing the relationship between price and quantity supplied for a specified period of time, other thinks being equal.

12

Law of supply

The observation that the higher the price of a good, the more of that good the sellers will make available over a specified time period, other things being equal.

13

Supply curve

The graphical representation of the supply schedule;a line(curve) showing the supply schedule, which generally slopes upward (has a positive slope) , other things being equal.

14

Subsidy

A negative tax; a payment to a producer from the government, usually in the form of a cash grant per unit.

15

Market clearing, or
Equilibrium, price

The price that clears the market, at which quantity demanded equals quantity supplied; the price where the demand curve intersects the supply curve.

16

Equilibrium

The situation when quantity supplied equals quantity demanded at a particular price.

17

Shortage

A situation in which a quantity demanded is greater than quantity supplied at a price below the market clearing price.

18

Surplus

A situation in which quantity supplied is greater than quantity demanded at a price above the market clearing price.