Chapter 3: Where Prices Come From: The Interaction Of Demand & Supply

Front 1

"Ceteris paribus" ("all else equal") condition

Back 1

The requirement that when analyzing the relationship between two variables- i.e. price and quantity demanded- other variables must be held constant.

Front 2

Competitive market equilibrium

Back 2

A market equilibrium with many buyers and sellers.

Front 3

Complements

Back 3

Goods and Services that are used together.

Front 4

Demand Curve

Back 4

A curve that shows the relationship between the price of a product and the quantity of the product demanded.

Front 5

Demand schedule

Back 5

A table that shows the relationship between the price of a product and the quantity of the product demanded.

Front 6

Demographics

Back 6

The characteristics of a population with respect to age, race, and gender.

Front 7

Income effect

Back 7

The change in the quantity demanded of a good that results from the effect of a change in the good's price on consumers' purchasing power, ceteris paribus.

Front 8

Inferior Good

Back 8

A good for which the demand increases as income falls and decreases as income rises.

Front 9

Law of Demand

Back 9

The rule that, ceteris paribus, when the price of a product falls, the quantity demanded of the product will increase, and when the price of a product rises, the quantity demanded of the product will decrease.

Front 10

Law of Supply

Back 10

The rule that, Ceteris paribus, increases in price causes increases in the quantity supplied, and decreases in price cause decreases in the quantity supplied.

Front 11

Market Demand

Back 11

The demand by all the consumers of a given good or service.

Front 12

Market Equilibrium

Back 12

A situation in which quantity demanded equals quantity supplied.

Front 13

Normal good

Back 13

A good for which the demand increases as income rises and decreases as income falls.

Front 14

Perfectly competitive market

Back 14

A market that meets the conditions of

(1)many buyers and sellers,

(2) all firms selling identical products, and

(3) no barriers to new firms entering the market.

Front 15

Quantity demanded

Back 15

The amount of a good or service that a consumer is willing and able to purchase at a given price

Front 16

Quantity Supplied

Back 16

The amount of a good or service that a firm is willing and ale to supply at a given price.

Front 17

Shortage

Back 17

A situation in which the quantity demanded is greater than the quantity supplied.

Front 18

Substitutes

Back 18

Goods and services that can be used for the same purpose.

Front 19

Substitution effect

Back 19

The change in the quantity demanded of a good that results from a change in price making the good more or less expensive relative to other goods that are substitutes.

Front 20

Supply Curve

Back 20

A curve that shows the relationship between the price of a product and the quantity of the product supplied.

Front 21

Supply Schedule

Back 21

A table that shows the relationship between the price of a product and the quantity of the product supplied.

Front 22

Surplus

Back 22

A situation in which the quantity supplied is greater than the quantity demanded.

Front 23

Technological Change

Back 23

A change in the ability of a firm to produce a given level of output with a given quantity of inputs.