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29 Cards in this Set

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Demand
The amounts of a good or service that buyers (or a buyer) wish to purchase at various prices during some time period.
Demand Schedule
A schedule showing the amounts of a good or service that buyers (or a buyer) wish to purchase at various prices during some time period.
Law of Demand
The principal that, other things equal, an increase in a product's price will reduce the quantity of it demanded, and conversely for a decrease in price.
Diminishing Marginal Utility
In any specific time period, each buyer of a product will derive less satisfaction (or benefit, or utility) from each successive unit of the product consumed.
Income Effect
A change in the quantity demanded of a product that results from the change in real income (purchasing power) caused by a change in the product's price.
Substitution Effect
(1) a change in the quantity demanded of a consumer good that results from a change in its relative expensiveness caused by a change in the product's price; (2) the effect of a change in the price of a resource on the quantity of the resource employed by a firm, assuming no change in its output.
Demand Curve
A curve illustrating demand.
Determinants of Demand
Factors other than price that determine the quantities demanded of a good or service.
1) consumers' tastes (preference) 2) the number of buyers in the market 3) consumers' incomes 4) the prices of related goods 5) consumer expectations.
Normal Goods
A good or service whose consuption increases when income increases and falls when income decreases, price remaining constant.
Inferior Goods
A good or service whose consuption declines as income rises (and conversely), price remaining constant.
Substitute Good
Products or services that can be used in place of each other. When the price of one falls, the demand for the other product falls; conversely, when the price of one product rises, the demand for the other product rises.
Complementary Good
Products and services that are used together. When the price of one falls, the demand for the other increases (and conversely).
Change in Demand
A change in the quantity demanded of a good or service at every price; a shift of the demand curve to the left or right.
Change in Quantity Demanded
A change in the amount of a product that consumers are willing and able to purchase because of a change in the product's price.
Supply
The amounts of a good or service that sellers (or a seller) will offer at various prices during some period.
Supply Schedule
A schedule showing the amounts of a good or service that sellers (or a seller) will offer at various prices during some period.
Law of Supply
The principle that, other things equal, an increase in the price of a product will increase the quantity of it supplied, and conversely for a price decrease.
Supply curve
A curve illustrating supply.
Determinants of Supply
Factors other than price that determine the quantities of a good or service. 1) resource prices 2) technology 3) taxes and subsidies 4) prices of other goods 5) producer expectations 6) the number of sellers in the market.
Change in Supply
A change in the quantity supplied of a good or service at every price; a shift of the supply curve to the left or right.
Change in Quantity Supplied
A change in the amount of a product that producers offer for sale because of a change in the product's price.
Equilibrium Price
The price in a competitive market at which the quantity demanded and the quantity supplied are equal, there is neither a shortage nor a surplus, and there is no tendency for price to rise or fall.
Equilibrium Quantity
1) The quantity demanded and supplied at the equilibrium price in a competitive market; 2) the profit-maximizing output of a firm.
Surplus
The amount by which the quantity supplied of a product exceeds the quantity demanded at a specific (above-equilibrium) price.
Shortage
The amount by which the quantity demanded of a product exceeds the quantity supplied at a particular (below equilibrium) price.
Productive Efficiency
The production of a good in the least costly way; occurs when production takes place at the output at which average total cost is a minimum and marginal product per dollar's worth of input is the same for all inputs.
Allocative Efficiency
The apportionment of resources among firms and industries to obtain the production of the products most wanted by society (consumers); the output of each product at which its marginal cost and price or marginal benefit are equal.
Price Ceiling
Sets the maximum legal price a seller may charge for a product or service.
Price Floor
A minimum price fixed by the government for a product or service.