question
Competitive Market
answer
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
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Complements
answer
Two good are ___ if a rise in the price of one of the goods leads to a decrease in the demand of the other good
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Demand Curve
answer
A graphical representation of the demand schedule; it shows the relationship between quantity demanded and price
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Demand Schedule
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Shows how much of a good or service consumers will want to buy at different prices
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Individual Demand Curve
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Illustrates the relationship between quantity demanded and price for an individual consumer
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Inferior Good
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When a rise in income decreases the demand for a good
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Law of Demand
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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 (inverse)
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Normal Good
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When a rise in income increases the demand for a good
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Quantity Demanded
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The actual amount of a good or service consumers are willing and able to buy at some specific price
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Substitutes
answer
Two good are ___ if a rise in the price of one of the goods leads to an increase in the demand of the other good
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Supply and Demand Model
answer
A model of how a competitive market works
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Equilibrium
answer
An economic situation is in ___ when no individual would be better off doing something different
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Equilibrium Price
answer
The price that matches the quantity supplied and the quantity demanded
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Equilibrium Quantity
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The quantity supplied and the quantity demanded at the equilibrium price
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Individual Supply Curve
answer
Illustrates the relationship between quantity supplied and price for an individual producer
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Input
answer
Anything that is used to produce a good or service
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Law of Supply
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Says that, other things being equal, the price and quantity supplied of a good are positively related
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Market-Clearing Price
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Same as equilibrium price
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Quantity Supplied
answer
The actual amount of a good or service producers are willing to sell at some specific price
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Shortage
answer
Excess demand; when the quantity demand exceeds the quantity supplied (when the price is below its equilibrium level)
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Supply Curve
answer
Shows the relationship between quantity supplied and price
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Supply Schedule
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Shows how much of a good or service producers will supply at different prices
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Surplus
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Excess supply; the quantity supplied exceeds the quantity demanded (when the price is above its equilibrium level)
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Black Markets
answer
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 charged are legally prohibited by a price ceiling
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Deadweight Loss
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The lost gains associated with transactions that do not occur due to market intervention
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Demand Price
answer
The price at which consumers will demand that quantity
question
License
answer
Gives its owner the right to supply a good or service
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Minimum Wage
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A legal floor on the wage rate, which is the market price of labor
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Price Ceiling
answer
A maximum price sellers are allowed to charge for a good or service
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Price Controls
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Legal restrictions on how high or low a market price may go
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Price Floor
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A minimum price buyers are required to pay for a good or service
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Quantity Control
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An upper limit on the quantity of some good that can be bought or sold
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Quota Rent
answer
The difference between the demand and supply price at the quota amount; the earnings that accrue to the license-holder from ownership of the right to sell the good (equal to the market price of the license when the license are traded)
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Wedge
answer
The price paid by buyers ends up being higher than that received by sellers
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Supply Price
answer
The price at which producers will supply that quantity
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