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29 Cards in this Set
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- Back
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Demand
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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.
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Demand Schedule
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(see demand)
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Law of Demand
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The principle that, other things equal, increase in a product's price will reduce the quantity of it demanded, and conversely for a decrease in price.
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Diminishing marginal utility
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The principle that as a consumer increases the consumption of a good or service, the marginal utility obtained from each additional unit of the good or service decreases.
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Income effect
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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.
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substitution effect
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(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;
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(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.
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demand curve
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A curve illustrating demand
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determinants of demand
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Factors other than price that determine the quantities demanded of a good or service.
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normal good
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A good or service whose consumption increases when income increases and falls when income decreases, price remaining constant.
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inferior goods
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A good or service whose consumption declines as income rises, prices held constant.
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substitute good
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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.
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complementary good
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Products and services that are used together. When the price of one falls, the demand for the other increases(and conversely)
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change in demand
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A movement of an entire demand curve or schedule such that the quantity demanded changes at every particular price; caused by a change in one or more of the determinants of demand.
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change in quantity demanded
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A change in quantity demanded along a fixed demand curve(or within a fixed demand schedule) as a result of a change in the product's price.
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supply
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A schedule showing the amounts of a good or service that sellers(or a seller) will offer at various prices during some period.
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supply schedule
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(See supply)
A schedule showing the amounts of a good or service that sellers(or a seller) will offer at various prices during some period. |
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law of supply
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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.
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supply curve
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A curve illustrating supply.
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determinants of supply
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Factors other than price that determine the quantities supplied of a good or service.
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change in supply
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A movement of an entire supply curve or schedule such that the quantity supplied changes at every particular price; caused by a change in one or more of the determinants of supply.
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change in quantity supplied
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A change in the quantity supplied along a fixed supply curve(or within a fixed supply schedule) as a result of a change in the product's price.
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Equilibrium price
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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.
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equilibrium quantity
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(1) The quantity at which the intentions of buyers and sellers in a particular market match at a particular price such that the quantity demanded and the quantity supplied are equal.
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(2) The profit maximizing output of a firm.
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surplus
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The amount by which the quantity supplied of a product exceeds the quantity demanded at a specific(above equilibrium) price.
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shortage
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The amount by which the quantity demanded of a product exceeds the quantity supplied at a particular(below equilibrium) price.
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productive efficiency
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The production of a good in the least costly way; occurs when production takes place at the output which average total cost is a minimum and marginal product per dollar's worth of input is the same for all inputs.
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allocative efficiency
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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, and at which the sum of consumer surplus and producer surplus is maximized.
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price ceiling
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A legally established maximum price for a good or service.
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price floor
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A legally determined minimum price above the equilibrium price.
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