Macroeconomics Mcconnell Brue 17 Chapter 3

Front 1

Demand

Back 1

The amounts of a good or service that buyers (or a buyer) wish to purchase at various prices during some time period.

Front 2

Demand Schedule

Back 2

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.

Front 3

Law of Demand

Back 3

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.

Front 4

Diminishing Marginal Utility

Back 4

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.

Front 5

Income Effect

Back 5

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.

Front 6

Substitution Effect

Back 6

(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.

Front 7

Demand Curve

Back 7

A curve illustrating demand.

Front 8

Determinants of Demand

Back 8

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.

Front 9

Normal Goods

Back 9

A good or service whose consuption increases when income increases and falls when income decreases, price remaining constant.

Front 10

Inferior Goods

Back 10

A good or service whose consuption declines as income rises (and conversely), price remaining constant.

Front 11

Substitute Good

Back 11

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.

Front 12

Complementary Good

Back 12

Products and services that are used together. When the price of one falls, the demand for the other increases (and conversely).

Front 13

Change in Demand

Back 13

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.

Front 14

Change in Quantity Demanded

Back 14

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.

Front 15

Supply

Back 15

The amounts of a good or service that sellers (or a seller) will offer at various prices during some period.

Front 16

Supply Schedule

Back 16

A schedule showing the amounts of a good or service that sellers (or a seller) will offer at various prices during some period.

Front 17

Law of Supply

Back 17

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.

Front 18

Supply curve

Back 18

A curve illustrating supply.

Front 19

Determinants of Supply

Back 19

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.

Front 20

Change in Supply

Back 20

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.

Front 21

Change in Quantity Supplied

Back 21

A change in the amount of a product that producers offer for sale because of a change in the product's price.

Front 22

Equilibrium Price

Back 22

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.

Front 23

Equilibrium Quantity

Back 23

1) The quantity demanded and supplied at the equilibrium price in a competitive market; 2) the profit-maximizing output of a firm.

Front 24

Surplus

Back 24

The amount by which the quantity supplied of a product exceeds the quantity demanded at a specific (above-equilibrium) price.

Front 25

Shortage

Back 25

The amount by which the quantity demanded of a product exceeds the quantity supplied at a particular (below equilibrium) price.

Front 26

Productive Efficiency

Back 26

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.

Front 27

Allocative Efficiency

Back 27

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.

Front 28

Price Ceiling

Back 28

Sets the maximum legal price a seller may charge for a product or service.

Front 29

Price Floor

Back 29

A minimum price fixed by the government for a product or service.