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15 Cards in this Set

  • Front
  • Back
demand curve
- shows the quantity of a good that buyers wish to buy and are able to buy at each price
- a buyer's reservation price at every quantity
substitution effect
- as the price of one good goes up, people substitute another good for it
- causes the downward slope because increase in price = decrease in purchases
income effect
- people still buy the good (no substitution), but they cannot buy as much since their income can only support a certain amount
change in quantity demanded
- movement along the curve
- caused by a change in price ONLY
change in demand
- shift of the entire demand curve
- caused by anything EXCEPT for price
normal good
- as income increases, they buy more of this good
inferior good
- as income increases, they buy less of this good
buyer's reservation price
- the maximum a buyer will pay for a certain quantity of a good
supply curve
- shows the quantity of goods that sellers are able to sell and wish to sell at each possible price
- a seller's reservation price at every quantity
change in quantity supplied
- movement along the curve
- change occurs because of price ONLY
change in supply
- shift in the supply curve
- caused by anything EXCEPT for price
seller's reservation price
- the lowest price they are willing to sell a quantity of goods for
buyer's surplus
- the difference between the buyer's reservation price and the market price
seller's surplus
- the difference between the market price and the seller's reservation price
total surplus
- the difference between the buyer's and the seller's reservation prices