Microeconomics Chapter 3: Demand, Supply, and Market Equilibrium

an institution or mechanism the brings together buyer (demanders) and sellers (suppliers)

a large number of independent buyers and sellers, standardized goods, and prices

a schedule that shows the various amounts of a product that consumers are willing and able to buy at each specific price during a specific time.

demand and supply

a period of time associated with it

the corresponding quantity demanded falls

inverse, downward sloping, or negative

any thing besides the price of the product being discussed like consumer tastes and complements

according to the law of demand there is a decrease in added satisfaction that res

refers to the law of demand saying lower prices increases the purchasing power of money income which enables the consumer to buy more without having to reduce consumption of other goods.

the law of demand a lower price for a similar good gives an incentive to substitute the lower priced good for a relatively higher priced good.

the inverse relationship between price and quantity

lower quantity at a higher price and higher quantity at a lower price

summing individual quantities at various price levels

a horizontal sum of individual curves

determinant of demand referring to favorable changes in preference that lead to increased demand and unfavorable for decreased demand

determinant of demand saying more buyers leads to increased demand and fewer buyers = decrease

more income=increase in demand for normal goods & less income=decrease the inverse for inferior goods

determinants of demand: substitute and complementary goods

goods that can be used in place of each other

directly related to each other so that if the price of one (Coke) increases the demand of the other (Pepsi) increases

goods that are used together like baseballs and bats

inverse between the price of one and the demand of the other

determinants of demand that refer to the way consumers views about future prices and income shift demand

1. favorable changes in consumer taste
2. increase in number of buyers
3. rising income if the product is a normal good
4. falling incomes if the product is an inferior good
5. increase in the price of a substitute good
6. decrease in the price of a complementary good
7. consumers expect high prices/incomes in future

1. unfavorable changes in consumer taste
2. decrease in number of buyers
3. falling income if product is a normal good
4. rising income if product is an inferior good
5. decrease in the price of a substitute good
6. increase in price of a complementary good
7. consumers expect lower prices/income in future

a schedule that shows the amounts of a product a producer is willing and able to produce and sell at each specific price in a series of possible prices during a specified time period

quantities will be offered at various prices or what price is required to induce various quantities to be offered

producers will produce and sell more of a product at a high price than a low price

there is a direct relationship between price and quantity supplied

increasing costs per added unit of output

the direct relationship in an upward sloping curve

shift right

shift left

resource prices, technology, taxes and subsidies, prices of related goods, producer expectations and # of sellers

a decrease in supply and a leftward shift in the supply curve

an increase in supply and a rightward shift in the supply curve

where quantity supplied equals quantity demanded

an excess quantity or a surplus

an excess in quantity demanded or a shortage

market clearing or market price

where the supply and demand curves intersect

supply equals demand

the ability of the competitive forces of supply and demand to establish a price where buying and selling decisions are coordinated

the practice of reselling tickets at a higher than original price

assets/tickets from those who value them less than money to those who value them more than the money they are will to pay

both the buyer and the seller feel that they gain something from the transaction or they wouldn't agree to the transaction

sponsors but they should have price the ticket higher

the spectator because those who want to go the most are getting the tickets

the sellers and buyers benefit but the sponsors lose but its their own fault

productive and allocative efficiency

the production of any particular good in the least costly way

be unprofitable and have difficulty competing in market

producing the best combination of goods and services most valued by society

the competitive process

productive efficiency

allocative efficiency because goods can be produced in the least costly way without being the most wanted by society

equilibrium price and quantity in a competitive market

increase demand=increased equilibrium price&quantity
decrease demand=decreased equilibrium pricequantity

increase supply=dec equilibrium price & inc quantity
decrease supply=inc equilibrium price & dec quantity

dec equilibrium price & unknown equilibrium quantity

inc equllibrium price & unknown equilibrium quantity

unknown equilibrium price & inc equilibrium quantity

unknown equilibrium price & dec equilibrium quantity

shift demand curve and change quantity supplied

shift the supply curve and change quantity demanded

the market from reaching equilibrium

the maximum legal price a seller may charge usually below equilibrium

shortages as quantity demanded exceeds quantity supplied and alternative methods of rationing

the price mechanism

rent controls, rationing coupons, black market & lines

the minimum price a seller may charge usually above equilibrium

surplus as quantity supplied exceeds quantity demanded

wheat cost and minimum wage