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Demand
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the willingness and ability of purchasers to buy goods or services
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supply
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the willingness of producers and merchandisers to provide goods and services
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market price
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the prevailing price for a specific good or service at a particular time in a given market
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market quantity sold
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the number of "units" of a specific good or service sold in a given market during a particular period
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positive (or direct) relationship
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the relationship between two variables when an increase in one is associated with an increase in another variable
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individual supply
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the supply of one particular seller
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market (or aggregate) supply
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the supply from all sellers in a particular market
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supply schedule
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A table that shows the relationship between the price of a good and the quantity supplied
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supply curve
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A curve showing the relation between price of a good and the quantity producers are willing and able to sell per period other things constant
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change in the quantity supplied
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movement along a supply curve in response to a price change
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ceteris paribus
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meaning "other things equal" or "all else constant"
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change in supply
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a shift of the entire supply curve, in response to something changing other than price
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nonprice determinants of supply
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any factor that affects the quantity supplied, other than the price of the good or service offered for sale
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demand schedule
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A table that shows the relationship between the price of a good and the quantity demanded
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demand curve
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A curve describing the quantities of a good a consumer is willing and able to buy at alternative prices in a given time period, ceteris paribus.
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negative (or inverse) relationship
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the relationship between two variables if an increase in one is associated with a decrease in the other variable
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market (or aggregate) demand
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the demand from all buyers in a particular market
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individual demand
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the demand of one particular buyer
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change in the quantity demanded
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movement along a demand curve in response to a price change
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change in demand
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the shift of the entire demand curve in response to something changing other than price
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nonprice determinants of demand
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any factor that affects the quantity demanded, other than the price of the good or service being demanded
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substitute good
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a good that can be used in place of another good
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complementary good
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a good that is used along with another good
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surplus
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a situation in which the quantity that sellers are prepared to sell at a particular price exceeds the quantity that buyers are willing to buy at that price
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shortage
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a situation in which the quantity demanded at a particular price exceeds the quantity that sellers are willing to supply
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market equilibrium
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a situation in which the quantity supplied equals the quantity demanded, and thus there is no pressure for changes in price or quantity bought or sold
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theory of market adjustment
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the theory that market forces will tend to make shortages and surpluses disappear
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market disequilibrium
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a situation of either shortage or surplus
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markup (or costplus) pricing
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a method of setting prices in which the seller adds a fixed percentage amount to his or her costs of production
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market value
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the maximum amount that economic actors are willing and able to pay for a good or service
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inadequacy
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a situation in which there is not enough of a good or service provided at prices people can afford to meet minimal requirements for human well-being
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precise
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describes something that is exact (though it may be unrealistic)
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accurate
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describes something that is correct (even if only in a general way)
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neoclassical model
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a model the portrays the economy as a collection of profit-maximizing firms and utility-maximizing households interacting through perfectly competitive markets
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rationality axiom
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the statement that "rational economic man maximizes his utility (or self-interest)"
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behavioral economics
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a subfield of economics focusing on decision-making patters that deviate from those predicted by traditional consumer theory
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availability heuristic
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placing undue importance on particular information because it is readily available or vivid
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framing
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changing the way a particular decision is presented to people in order to influence their behavior
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anchoring effect
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over-reliance on a piece of information that may or may not be relevant as a reference point when making a decision
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optimizing behavior
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behavior that achieves an optimal (best possible) outcome
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satisfice
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to choose an outcome that would be satisfactory and then seek an option that at least reaches that standard
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meliorating
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starting from the present level of well-being and continuously attempting to do better
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path dependence
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situations in which what is possible, or what is chosen, in the present depends on what has happened in the past
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bounded rationality
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the hypothesis that people make choices among a somewhat arbitrary subset of all possible options due to limits on information, time, or cognitive abilities
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altruistic behavior
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actions focused on the well-being of others, with no thought about oneself
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the common good
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the general well-being of society, including one's own well-being
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consumer sovereignty
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the idea that consumers' need and wants determine the shape of all economic activities
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budget line
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a line showing the possible combinations of two goods that a consumer can purchase
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utility
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the pleasure or satisfaction received from goods, services, or experiences
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utility function (or total utility curve)
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a curve showing the relation of utility levels to consumption levels
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diminishing marginal utility
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the tendency for additional units of consumption to add less to utility than did previous units of consumption
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consumer society
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a society in which a large part of people's sense of identity and meaning is found through the purchase and use of consumer goods and services
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consumerism
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having one's sense of identity and meaning defined largely through the purchase and use of consumer goods and services
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absolute deprivation
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severe deprivation of basic human needs
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relative deprivation
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the feeling of lack that comes from comparing oneself with someone who has more
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reference group
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the group to which an individual compares himself or herself
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aspirational group
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the group to which an individual aspires to belong
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ecological footprint
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an estimate of how much land area a human society requires to provide all that the society takes from nature and to absorb its wast and pollution
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green consumerism
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making consumption decisions at least partly on the basis of environmental criteria
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ecolabeling
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product labels that provide information about environmental impacts, or indicate certification
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subjective well-being (SWB)
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a measure of welfare based on survey questions asking people about their own degree of life satisfaction
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social value
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the extent to which an outcome moves us toward our final goals
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lorenz curve
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a line used to portray an income distribution, drawn on a graph with percentiles of households on the horizontal axis and the cumulative percentage of income on the vertical axis
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gini ratio
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a measure of inequality that goes from 0 (absolute inequality) to 1 (absolute equality)
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capital gains
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increase in the value of an asset at the time it is sold compared to the price at which it was originally purchased by the same owner
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economic mobility
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the potential for an individual or household to change its economic conditions over time
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labor income
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payments to workers, including wages, salaries, and fringe benefits
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capital income
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rents, profits, and interest
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rent
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payments for the direct or indirect use of any capital assets
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5 philosophical perspectives of inequality
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equality of outcomes, equality of opportunities, equal rewards for equal contributions, equal rights, the basic needs approach
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plutocracy
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a class or group ruling, or exercising power or influence, by virtue of its wealth
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