Chapter 3 - The Market At Work

Front 1

Market Economy

Back 1

resources are allocated among households and firms with little or no government interference

Front 2

Competitive Market

Back 2

exists when there are so many buyers and sellers that each has only a small impact on the market price and output

Front 3

Imperfect Market

Back 3

one in which either the buyer or the seller has an influence on the market price

Front 4

Monopoly

Back 4

exists when a single company supplies the entire market for a particular good or service

Front 5

Quantity Demanded

Back 5

the amount of a good or service that buyers are willing and able to purchase at the current price

Front 6

Law of Demand

Back 6

states that, all other things being equal, quantity demanded falls when prices rise, and rises when prices fall

Front 7

Demand Schedule

Back 7

a table that shows the relationship between the price of a good and the quantity demanded

Front 8

Demand Curve

Back 8

a graph of the relationship between the prices in the demand schedule and the quantity demanded at those prices

Front 9

Market Demand

Back 9

the sum of all the individual quantities demanded by each buyer in the market at each price

Front 10

Normal Good

Back 10

A good consumers buy more of as income rises, holding other things constant

Front 11

Inferior Good

Back 11

purchased out of necessity rather than choice

Front 12

Complements

Back 12

two goods that are used together; when price of complementary good rises, the demand for the related good goes down

Front 13

Substitutes

Back 13

two goods that are used in place of each other; when the price of a substitute good rises, the quantity demanded falls and the demand for the related good goes up

Front 14

Quantity Supplied

Back 14

the amount of a good or service that producers are willing and able to sell at the current price

Front 15

Law of Supply

Back 15

states that all other things being equal, the quantity supplied of a good rises when the price of good rises, and falls when the price of the good falls

Front 16

Supply Schedule

Back 16

a table that shows the relationship between the price of a good and the quantity supplied

Front 17

Supply Curve

Back 17

graph of the relationship between the prices in the supply schedule and the quantity supplied at those prices

Front 18

Market Supply

Back 18

the sum of the quantities supplied by each seller in the market at each price

Front 19

Inputs

Back 19

resources used in the production process

Front 20

Equilibrium

Back 20

occurs at the point where the demand curve and the supply curve intersect

Front 21

Equilibrium Price

Back 21

the price at which the quantity supplied is equal to the quantity demanded

Front 22

Equilibrium Quantity

Back 22

the amount at which the quantity supplied is equal to the quantity demanded

Front 23

Law of Supply and Demand

Back 23

states that the market price of any good will adjust to bring the quantity supplied and the quantity demanded into balance

Front 24

Shortage

Back 24

occurs whenever the quantity supplied is less than the quantity demended

Front 25

Surplus

Back 25

occurs whenever the quantity supplied is greater than the quantity demanded