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25 Cards in this Set
- Front
- Back
Market |
All of the arrangements that individuals have for exchanging with one another. Thus, for example, we can speak of the labor market, the automobile market, and the credit market. |
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Demand |
A schedule showing how much of a good or service people will purchase at any price during a specified time period, other things being constant. |
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Law of demand |
The observation that there is a negative, or inverse, relationship between the price of any good or service and the quantity demanded, holding other factors constant. - when the price of a good goes up people buy less if it, other things being equal. When the price of a good goes down people buy more of it, other things being equal. |
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Relative price |
The money price of one commodity divided by the money price of another commodity; the number of units of one commodity that must be sacrificed to purchase one unit of another commodity |
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Money price |
The price expressed in today's dollars also called the absolute or nominal price. |
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Demand curve |
A graphical representation of the demand schedule. It is a negatively sloped line showing the inverse relationship between the price and the quantity demanded (other things being equal) |
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Market demand |
The demand of all consumers in the marketplace for a particular good or service. The summation at each price of the quantity demanded by each individual |
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Ceteris paribus conditions |
Determinants of the relationship between price and quantity that are unchanged along a curve. Changes in these factors cause the curve to shift |
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Normal goods |
Good for which demand rises as income rises. Most goods are normal goods |
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Inferior goods |
Goods for which demand falls as income rises |
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Substitutes |
Two goods are substitutes when a change in the price of one causes a shift in the demand for the other in the same direction as the price change |
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Complements |
Two goods are complements when a change in the price if one causes an opposite shift in the demand for the other |
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Demand refers to: |
A schedule of planned rated of purchase and depends on a great many ceteris paribus conditions such as incomes expectations and prices of substitutes or complements. Whenever there is a change in a ceteris paribus condition there will be a change in demand. A shift in the entire demand curve to the right or to the left |
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Quantity demanded: |
A specific quantity at a specific price, represented by a single point on a demand curve |
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Supply |
A schedule showing the relationship ship between price and quantity supplied for a specified period of time, other things being equal |
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Law of supply |
The observation that the higher the price of a good, the more of that good sellers will make available over a specified time period, all other things being equal |
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The supply schedule |
A table relating prices to the quantity supplied at each price. Can also be referred to as supply. It is a set of planned production rates that depends on the price of the product |
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Supply curve |
The graphical representation of the supply schedule; a line showing the supply schedule, which generally slopes upward (has a positive slope) other things being equal. |
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Subsidy |
A negative tax; a payment to a producer from the government, usually in the form of a cash grant per unit. |
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A change or shift in supply |
A movement of the entire curve. The only thing that can cause the entire curve to move is a change in one of the ceteris paribus conditions |
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A change in price |
Leads to a change in the quantity supplied, other things being constant, this is a movement along the curve |
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Market clearing or equilibrium price |
The price that clears the market, at which quantity demanded equals quantity supplied; the price where the demand curve intersects the supply curve |
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Equilibrium |
The situation when quantity supplied equals quantity demanded at a particular price |
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Shortages |
A situation in which quantity demanded is greater than quantity supplied at a price below the market clearing price |
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Surplus |
A situation in which quantity supplied is greater than quantity demanded at a price above the market clearing price |