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AP Macro Econ. chapter 3/4 (?) (transferred from quizlet)
Market
any institution or mechanism that brings together buyers (demanders) and sellers (suppliers) of a particular good or service
Demand
a schedule showing the amounts of a good or service that buyers (or a buyer) wish to purchase at various prices during some time period
Demand schedule
table that represents the quantity demanded at various price points
Law of demand
the principle that, other things equal, an increase in a products price will reduce the quantity of it demanded and conversely for a decrease in price
Diminishing marginal utility
successive units of a product yield less and less satisfaction so consumer will only buy additional units if the price is reduced
Income effect
a change in the quantity demanded of a product that results from the change in real income (purchasing power) produced by a change in the products price
Substitution effect
a change in the quantity demanded of a consumer good that results from a change in its relative expensiveness produced by a change in the product's price
the effect of the change in a price of a resource on the quantity of the resource employed by the firm, assuming no change in its output
Demand curve
a curve illustrating demand
Determinants of demand
factors other than the price that determine the quantities demanded of a good or service
Inferior goods
a good or service whose consumption declines as income rises (and conversely) price remaining constant
Substitute good
products or services that can be used in the place of each other, when the price of one falls, the demand of the other product falls; conversely when the price of one product rises, the demand for the other product rises
Complementary good
products and services that are used together, when the price of one falls, the demand for the other increases (and conversely)
Change in demand
a change in the quantity demanded of a good or service at every price, a shift of the demand curve to the left or right
Change in quantity demanded
movement from one price-quantity combination to another on the demand curve
Supply
a schedule showing the amounts of a good or service that sellers (or a seller) will offer at various prices during some period
Supply schedule
a table showing various quantities of a product that will be supplied at various prices, all other things equal
Law of supply
the principle that other things equal an increase in the price of a product will will increase the quantity of it supplied and conversely for a price decrease
Supply curve
a curve illustrating supply
Determinants of supply
factors other than price that determine the quantities supplied of a good or service
Change in supply
a change in the quantity supplied of a good or service at every price, a shift of the supply curve to the left or right
Change in quantity supplied
a movement from one point to another on the fixed supply curve
Surplus
the amount by which the quantity supplied of a product exceeds the quantity demanded at a specific (above equilibrium) price
Shortage
the amount by which the quantity demanded of a product exceeds the quantity supplied at a particular (below equilibrium) price
Equilibrium price
the price in a competitive market at which the quantity demanded and the quantity supplied are equal there is neither a shortage or a surplus and there is no tendency for price to rise or fall
Equilibrium quantity
the quantity demanded and supplied at equilibrium price in an competitive market
the profit- maximizing output of a firm
Rationing function of prices
the ability of market forces in competitive markets to equalize quantity demand and quantity supplied and to eliminate shortages and surpluses via changes in prices
Note
Flashcard