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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Supply and Demand model
answer
a model of how competitive a market behaves
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Demand schedule
answer
shows how much of a good or service consumers will want to buy at different prices
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Quantity demanded
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the actual amount of a good or service consumers are willing to buy at some specific price
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Demand curve
answer
graphical representation of the demand schedule. The shows the relationship between quantity demanded and price
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Law of demand
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a higher price for a good or service, other things equal, leads people to demand a smaller quantity of that good or service
question
shift of the demand curve
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a change in the quantity demanded at any given price
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movement along the demand curve
answer
a change in the quantity demanded of a good arising from a change in the good's price
question
leftward shift of demand curve
answer
decrease in demand
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rightward shift of demand curve
answer
increase in demand
question
Causes of shift in demand curve
answer
changes in prices of related good/services
changes in income
changes in tastes
changes in expectations
change in the number of consumers
changes in income
changes in tastes
changes in expectations
change in the number of consumers
question
Substitutes
answer
the rise in price of one of the goods leads to an increase in the demand of another good
ex: heating oil and natural gas
ex: heating oil and natural gas
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Complements
answer
the rise in price of one good leads to a decrease in the demand for the other good
ex. milk and cookies
ex. milk and cookies
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normal good
answer
a rise in income increases the demand for a good
question
inferior good
answer
a rise in income decreases the demand for the good
question
individual demand curve
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illustrates the relationship between quantity demanded and price for an individual consumer
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market demand curve
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the horizontal sum of the individual demand curves for all the individuals in the market
question
quantity supplied
answer
the actual amount of a good or service people are willing to sell at some specific price
question
supply schedule
answer
shows how much of a good or service would be supplied at different prices
question
supply curve
answer
shows the relationship between quantity supplied and price
question
shift in the supply curve
answer
a change in the quantity supplied for a good or service at any given price
question
movement along the supply curve
answer
a change in the quantity supplied arising from change in the good's price
question
rightward shift of supply curve
answer
increase in supply
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leftward shift of supply curve
answer
decrease in supply
question
Causes of shift in supply curve
answer
changes in input price
changes in prices of related goods or services
changes in technology
changes in expectation
changes in the number of producers
changes in prices of related goods or services
changes in technology
changes in expectation
changes in the number of producers
question
input
answer
a good or service that is used to produce another good or service
question
individual supply curve
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illustrates the relationship between the quantity supplied and the price for an individual producer
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increase in price of complement in production
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the supply of the original good increases
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increase in price of a substitute in production
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the supply of the original good decreases
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equilibrium price / market-clearing price
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the price at which the quantity of the good demanded equals the quantity of the good supplied
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equilibrium quantity
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the quantity of the good or service being sold at the equilibrium price
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surplus
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occurs when the quantity supplied exceeds the quantity demanded
occurs when the price is above its equilibrium level
occurs when the price is above its equilibrium level
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shortage
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occurs when the quantity demanded exceeds the quantity supplied
occurs when the price is below its equilibrium value
occurs when the price is below its equilibrium value
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Increase in demand (equilibrium)
answer
leads to movement along the supply curve to a higher equilibrium price and higher equilibrium quantity
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Decrease in demand (equilibrium)
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leads to movement along the supply curve to a lower equilibrium price and lower equilibrium quantity
question
Increase in supply (equilibrium)
answer
leads to movement along the demand curve to a lower equilibrium price and a higher equilibrium quantity
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Decrease in supply (equilibrium)
answer
leads to movement along the demand curve to a higher equilibrium price and a lower equilibrium quantity
question
Demand decreases and supply increases
answer
Eq price decreases
Eq quantity ambiguous
Eq quantity ambiguous
question
Demand increases and supply decreases
answer
Eq price increases
Eq quantity ambiguous
Eq quantity ambiguous
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If the supply and demand shift in opposite directions, then
answer
the equilibrium quantity change is ambiguous
question
If the supply and demand shift in the same direction, then
answer
the equilibrium price change is ambiguous
question
Demand and supply increase
answer
Eq price ambiguous
Eq quantity increases
Eq quantity increases
question
Demand and supply decrease
answer
Eq price ambiguous
Eq quantity decreases
Eq quantity decreases
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