Chapter 4 Flashcards
(21 cards)
market
the process of buyers and sellers exchanging goods and services
market equilibrium
the point at which the market supply and market demand curves intersect
shortage
a situation where quantity demanded exceeds quantity supplied
competitive market
a market where the many buyers and sellers have little market power- each buyer’s or seller’s effect on market price is negligible
law of demand
a quantity of a good or service demanded varies inversely with its price, ceteris paribus
individual demand schedule
a schedule that shows the relationship between price and quantity demanded
individual demand curve
a graphical representation that shows the inverse relationship between price and quantity demanded
market demand curve
the horizontal summation of individual demand curves
change in quantity demanded
a change in a good’s own price leads to a change in quantity demanded, a move along a given demand curve
shifts in the demand curve
change in one of the variables, other than the price of the good itself, that affects the willingness of consumers to buy
substitutes
an increase in the price of one good causes the demand curve for another good to shift to the right, or a decrease to the left
complements
an increase in the price of one good shifts the demand curve for another good to the left, or a decrease to the right
normal goods
if income increases, the demand for a good increases; if income decreases, the demand for a good decreases
inferior good
if income increases, the demand for a good decreases, if income decreases, the demand for a good increases
law of supply
the higher the price of the good, the greater the quantity supplied, or the lower the smaller
individual supply curve
a graphical representation that shows the positive relationship between the price and quantity supplied
market supply curve
a graphical representation of the amount of goods and services that suppliers are willing and able to supply at various prices
equilibrium price
the price at the intersection of the market supply and demand curves; at this price, the quantity demanded equals the quantity supplied
equilibrium quantity
the quantity at the intersection of the market supply and demand curves; at the equilibrium quantity, the quantity demanded equals the quantity supplied
surplus
a situation where quantity supplied exceeds quantity demanded
inferior goods
if income increases, the demand for a good decreases; if income decreases, the demand for a good increases
