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Ceteris Paribus ("all else equal") Condition
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The requirement that when analyzing the relationship between 2 variables, such as price and quantity demanded, other variables must be held constant.
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Competitive Market Equilibrium
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A market equilibrium with many buyers and sellers.
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Complements
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Goods and services that are used together.
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Demand Curve
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A curve that shows the relationship between the price of a product and the quantity of that product demanded.
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Demand Schedule
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A table that shows the relationship between the price of a product and the quantity of the product demanded.
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Demographics
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The characteristics of a population with respect to age, race and gender.
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Income Effect
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The change in the quantity demanded of a good that results from the effect of a change in the good's price on consumers' purchasing power, holding all other factors constant.
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Inferior Good
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A good for which the demand increases as income falls and decreases as income rises.
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Law of Demand
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The rule that, holding everything else constant, when the price of a product falls, the quantity demanded of the product will increase, and when the price of a product rises, the quantity demanded of the product will decrease.
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Law of Supply
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The rule that, holding everything else constant, increases in price cause increases in the quantity supplied, and decreases in the price causes decreases in the quantity supplied.
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Market Demand
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The demand by all the consumers of a given good or service.
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Market Equilibrium
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A situation in which quantity demanded equals quantity supplied.
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Normal Good
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A good for which the demand increases as income rises and decreases as income falls.
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Perfectly Competitive Market
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A market that meets the conditions of (1) many buyers and sellers, (2) all firms selling identical products, and (3) no barriers to new firms entering the market.
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Quantity Demanded
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The amount of a good or service that a consumer is willing and able to purchase at a given price.
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Quantity Supplied
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The amount of a good or service that a firm is willing and able to supply at a given price.
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Shortage
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A situation in which the quantity demanded is greater than the quantity supplied.
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Substitutes
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Goods and services that can be used for the same purpose.
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Substitution Effect
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The change in the quantity demanded of a good that results from a change in price, making the good more or less expensive relative to other goods that are substitutes.
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Supply Curve
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A curve that shows the relationship between the price of a produce and the quantity of the product supplied.
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Supply Schedule
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A table that shows the relationship between the price of a product and the quantity of the product supplied.
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Surplus
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A situation in which the quantity supplied is greater than the quantity demanded.
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Technological Change
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A change in the ability of a firm to produce a given level of output with a given quantity of inputs.