Flashcards in Chapter 3 Deck (19)
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.
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.
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.
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.
The price expressed in today's dollars; also called the absolute or nominal price.
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).
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.
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.
Goods for which demands rises as income rises. Most goods are normal goods.
Goods for which demand falls as income rises.
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.
A schedule showing the relationship between price and quantity supplied for a specified period of time, other thinks being equal.
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.
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.
A negative tax; a payment to a producer from the government, usually in the form of a cash grant per unit.
Market clearing, or
The price that clears the market, at which quantity demanded equals quantity supplied; the price where the demand curve intersects the supply curve.
The situation when quantity supplied equals quantity demanded at a particular price.
A situation in which a quantity demanded is greater than quantity supplied at a price below the market clearing price.