APMICRO UNIT 2 REVIEW

Supply and Demand

demand curve

the graphical representation of the demand schedule; it shows how much of a good or service consumers want to buy at any given pric

normal goods

When a rise in income increases the demand for a good

inferior good

When a rise in income decreases the demand for a good

substitutes

Two goods are _____________ if a fall in the price of one of the goods makes consumers less willing to buy the other good

complements

Two goods are ______________ if a fall in the price of one good makes people more willing to buy the other good.

factors that shift demand

change in taste, related goods and services,income, number of buyers, expectations

supply curve

Shows graphically how much of a good or service people are willing to sell at any given price

factors that shift supply

change in technology, related goods and services, input, expectations, number of producers

Equilibrium

An a competitive market: when the quantity demanded of a good equals the quantity supplied of that good

shortages

 when the quantity demanded exceeds the quantity supplied. Below equilibrium

surpluses

 when the quantity supplied exceeds the quantity demanded. Above Equilibrium

Price cieilings

The maximum price sellers are allowed to charge for a good or service

Price floor

In the minimum price butlers are required to pay for a good or service

Quota

An upper limit on the quantity of some good that can be bought or sold

Quota Rent

The difference between the demand and supply price at the quota limit

Wedge

deadweight loss

Occurs when a market is not perfectly competitive–the price is greater and the quantity is lower than in a perfectly competitive market structures