Section 2 - Modules 4, 5, 6, & 7

Front 1

competitive market

Back 1

a market in which there are many buyers and sellers of the same good or service, none of whom can influence the price at which the good or service is sold

Front 2

supply and demand model

Back 2

a model of how a competitive market works

Front 3

demand schedule

Back 3

shows how much of a good or service consumers will want to buy at different prices

Front 4

quantity demanded

Back 4

the actual amount of a good or service consumers are willing to buy at some specific price

Front 5

demand curve

Back 5

a graphical representation of the demand schedule; it shows the relationship between quantity demanded and price

Front 6

law of demand

Back 6

says that a higher price for a good or service, all other things being equal, leads people to demand a smaller quantity of that good or service

Front 7

change in demand

Back 7

a shift of the demand curve, which changes the quantity demanded at any given price

Front 8

movement along the demand curve

Back 8

a change in the quantity demanded of a good that is the result of a change in that good's price

Front 9

substitute

Back 9

a rise in the price of one of the goods leads to an increase in the demand for the other good

Front 10

complement

Back 10

a rise in the price of one good leads to a decrease in the demand for the other good

Front 11

* changes in the prices of related goods/services

* changes in income

* changes in tastes

* changes in expectations

* changes in the number of consumers

Back 11

five principal factors that shift the demand for a good or service

Front 12

normal good

Back 12

demand for these goods increases when consumer income rises

Front 13

inferior good

Back 13

demand for these goods decreases when consumer income rises

Front 14

individual demand curve

Back 14

illustrates the relationship between quantity demanded and price for an individual consumer

Front 15

market demand curve

Back 15

how the combined quantity demanded by all consumers depends on the market price of that good; the horizontal sum of the individual demand curves of all consumers in that market

Front 16

quantity supplied

Back 16

the actual amount of a good or service people are willing to sell at some specific price

Front 17

supply schedule

Back 17

shows how much of a good or service would be supplied at different prices

Front 18

supply curve

Back 18

shows the relationship between quantity supplied and price

Front 19

law of supply

Back 19

the general proposition that, all else constant, a higher price leads to higher quantity supplied, and a lower price leads to lower quantity supplied

Front 20

change in supply

Back 20

a shift of the supply curve, which changes the quantity supplied at any given price

Front 21

movement along the supply curve

Back 21

a change in the quantity supplied of a good arising from a change in the good's price

Front 22

* changes in input prices

* changes in the prices of related goods or services

* changes in technology

* changes in expectations

* changes in the number of producers

Back 22

five principal factors that shift the supply curve for a good or service

Front 23

input

Back 23

any good or service that is used to produce another good or service

Front 24

technology

Back 24

all the methods people can use to turn inputs into useful goods and services

Front 25

individual supply curve

Back 25

illustrates the relationship between quantity supplied and price for an individual producer

Front 26

market supply curve

Back 26

shows how the combined total quantity supplied by all individual producers in the market depends on the market price of that good; the horizontal sum of the individual supply curves of all producers

Front 27

equilibrium

Back 27

when no individual would be better off doing something different in an economic situation; where the supply curve and the demand curve intersect

Front 28

equilibrium price

Back 28

the price at which the quantity of a good or service demanded equals the quantity of that good or service supplied (aka market-clearing price)

Front 29

equilibrium quantity

Back 29

the quantity of a good or service bought and sold at the equilibrium (market-clearing) price

Front 30

surplus

Back 30

excess supply: when the quantity supplied exceeds the quantity demanded; occurs when the price is above its equilibrium level

Front 31

shortage

Back 31

excess demand: when the quantity demanded exceeds the quantity supplied; occurs when the price is below its equilibrium level

Front 32

price controls

Back 32

legal restrictions on how high or low a market price may go

Front 33

price ceiling

Back 33

a maximum price sellers are allowed to charge for a good or service

Front 34

price floor

Back 34

a minimum price buyers are required to pay for a good or service

Front 35

quantity control / quota

Back 35

an upper limit on the quantity of some good that can be bought or sold

Front 36

license

Back 36

gives its owner the right to supply a good or service; issuance is a form of quantity control

Front 37

inefficient allocation to consumers

Back 37

people who want the good badly and are willing to pay a high price don't get it, and those who care relatively little about the good and are only willing to pay a relatively low price do get it

Front 38

wasted resources

Back 38

people expend money, effort, and time to cope with the shortages cause by a price ceiling

Front 39

inefficiently low quality

Back 39

sellers offer low quality goods at a low price even though buyers would prefer a higher quality at a higher price

Front 40

black market

Back 40

a market in which goods or services are bought and sold illegally, either because it is illegal to sell them at all or because the prices charges are legally prohibited by a price ceiling

Front 41

minimum wage

Back 41

a legal floor on the wage rate, which is the market rate for labor

Front 42

inefficient allocation of sales among sellers

Back 42

those who would be willing to sell the good at the lowest price are not always those who manage to sell it

Front 43

inefficiently high quality

Back 43

sellers offer high-quality goods at a high price, even though buyers would prefer a lower quality at a lower price

Front 44

demand price

Back 44

the price of a given quantity at which consumers will demand that quantity

Front 45

supply price

Back 45

the price of a given quantity at which price producers will supply that quantity

Front 46

wedge

Back 46

the difference between the demand price of the quantity transacted and the supply price of the quantity transacted for a good when the supply of the good is legally restricted

Front 47

quota rent

Back 47

the earnings that accrue to the license-holder from ownership of the right to sell a good

Front 48

deadweight loss

Back 48

the lost gains associated with transactions that do not occur due to market intervention