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Flashcards in Chapter 3 Deck (25):
1

quantity demanded

Refers to the total number of units of a good that buyers are willing and able to purchase at a given price.

2

Price

What a buyer pays (or the seller receives) for a unit of the specific good or service.

3

Demand

Refers to how much of a good consumers are willing and able to purchase at all prices.

4

law of demand

The relationship between price and quantity demanded. All else equal, a rise in the price of a good decreases the quantity demanded of that good, while a fall
in price increases the quantity demanded.The relationship between price and quantity demanded. All else equal, a rise in the price of a good decreases the quantity demanded of that good, while a fall
in price increases the quantity demanded.

5

demand schedule

A table that shows the relationship between price and quantity demanded.

6

demand curve

A graph that shows the relationship between price and quantity demanded.

7

ceteris paribus

A Latin phrase meaning “other things being equal.” It is the assumption behind a demand curve that no other relevant economic factors are changing.

8

determinants of demand

Various factors that may cause a demand curve to shift. These factors include income, population, expectations, and prices of closely related goods.

9

normal good

If demand for a good rises as income rises, the good is known as a normal good.

10

inferior good

If demand for a good falls as income rises, the good is known as an inferior good.

11

complements

When an increase in the price of good 1 causes the demand for good 2 to increase, these goods are known as complements.

12

substitutes

When an increase in the price of good 1 causes the demand for good 2 to decrease, these goods are known as substitutes.

13

quantity supplied

Refers to the total number of units that sellers are willing and able to sell at a given price.

14

Supply

Refers to how much sellers are willing and able to sell at all prices.

15

law of supply

Pattern in which a rise in the price of a good or service almost always leads to an increase in the quantity supplied of that good or service, while a fall in price will decrease the quantity supplied.

16

supply schedule

A table that shows the relationship between price and quantity supplied.

17

supply curve

A graph that illustrates the relationship between price and quantity supplied.

18

determinant of supply

Various factors that may cause a supply curve to shift. They determine the quantity that firms are willing to sell at a given price.

19

equilibrium price

Price where quantity demanded is equal to quantity supplied.

20

equilibrium quantity

Where quantity supplied equals quantity demanded at the equilibrium price.

21

shortage

Occurs if buyers want to buy more than sellers want to sell. Also known as excess demand.

22

surplus

Occurs when sellers want to sell more than buyers want to buy at any given price. With a surplus situation, prices drop until the market reaches equilibrium. Also refers to when there are more loanable funds than borrowers want to borrow. Also known as excess supply.

23

Price controls

Laws that the government enacts to regulate prices. The two types of price controls are a price ceiling and a price floor.

24

price ceiling

Type of price control that keeps a price from rising above a certain level.

25

price floor

Type of price control that keeps a price from falling below a certain level. It is the lowest legal price that can be paid in markets for goods and services.