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Law of Demand
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Consumers buy more of a good when its price decreases and less when its price increases.
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Law of Supply
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Producers offer more of a good as its price increases and less as its price falls.
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Market equilibrium
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A situation in which quantity demanded equals quantity supplied.
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Surplus
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A situation in which quantity supplied is greater than quantity demanded.
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Shortage
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A situation in which quantity demanded is greater than quantity supplied.
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Factors of production are
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land, labor, capital and entrepreneurship
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Factors that affect demand are
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income, market size, consumer tastes, consumer expectations, substitute goods, complementary goods
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Factors that affect supply
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factors of production, substitutes and complements of production, technology, the weather
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Opportunity cost
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The most desirable alternative given up as the result of a decision.
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Relative price
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The price of a good in terms of another good.
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Microeconomics
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The study of how households and firms make decisions and how they interact in markets.
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Scarcity
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Limited quantities of resources to meet unlimited wants,
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Rational choices
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Choices that involve weighing up the benefit of any activity against its opportunity cost.
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Market
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Any arrangement that allows buyers and sellers to exchange things.
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When demand increases and supply decreases,
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equilibrium price rises, equilibrium quantity change is indeterminate.
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When demand increases,
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demand curve shifts right.
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When supply increases,
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supply curve shifts right.
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When demand decreases and supply increases,
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equilibrium price falls and the change in quantity is indeterminate.
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When demand decreases,
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demand curve shifts left.
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When supply decreases,
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supply curve shifts leftward.
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Price regulates
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buying and selling plans.
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Price adjusts
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when selling and buying plans don't match.
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Macroeconomics
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The study of the economy as a whole, including topics such as inflation, unemployment, and economic growth.
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Economics
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The study of how society manages its scarce resources.
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Entrepreneurship earns
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profit.
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Capital earns
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interest.
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Labor earns
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wages.
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Land earns
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rent.
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