Chapter 4 - The Market Forces of Supply and Demand Flashcards
Competitive Market
A competitive market is a market in which there are many buyers and many sellers, so that each has a negligible impact on the market price.
Market
A market is a group of buyers and sellers of a particular good or service.
Quantity Demanded
The quantity demanded is the amount of a good that buyers are willing and able to purchase.
Law of Demand
The law of demand is the claim that, other things equal, the quantity demanded of a good falls when the price of the good rises.
Demand Schedule
The demand schedule is a table that shows the relationship between the price of a good and the quantity demanded.
Demand Curve
The demand curve is a graph of the relationship between the price of a good and the quantity demanded.
Normal Good
A normal good is a good for which, other things equal, an increase in income leads to an increase in demand.
Inferior Good
An inferior good is a good for which, other things equal, an increase in income leads to a decrease in demand.
Substitutes
Substitutes are two goods for which an increase in the price of one leads to an increase in the demand for the other.
Complements
Complements are two goods for which an increase in the price of one leads to a decrease in the demand for the other.
Quantity Supplied
The quantity supplied refers to the amount of a good that sellers are willing and able to sell.
Law of Supply
The law of supply is the claim that, other things equal, the quantity supplied of a good rises when the price of the good rises.
Supply Schedule
A supply schedule is a table that shows the relationship between the price of a good and the quantity supplied.
Supply Curve
The supply curve is a graph of the relationship between the price of a good and the quantity supplied.
Equilibrium
Equilibrium is a situation in which the market price has reached the level at which quantity supplied equals quantity demanded.
