Topic 03 - Demand, Supply, and Prices Flashcards
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Vocabulary flashcards covering Topic 03: Demand, Supply, and Prices, including laws, schedules, curves, and elasticity concepts.
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16 Terms
Demand
The willingness and the ability to buy a product.
Microeconomics
The area of economics that deals with the behavior and decision-making by small units, such as individuals and firms.
Individual demand schedule
A table listing the quantity that a person will buy at all possible prices in the market.
Individual demand curve
A graph showing the quantity demanded by a person at all possible prices in the market.
Law of demand
States that the quantity demanded of a good or service is inversely related to its price; when price goes up, quantity demanded goes down.
Market demand curve
A graph showing the quantity of a good or service demanded by all consumers at all possible prices in the market.
Elasticity of demand
A measure of how great a change occurs in quantity demanded because of a change in price.
Elastic demand
When a change in price causes a relatively greater change in quantity demanded, such as the demand for fresh vegetables.
Inelastic demand
When a change in price causes a relatively smaller change in quantity demanded, such as the demand for salt or gas.
Unit elastic
A condition where a price change causes a proportional change in quantity demanded.
Law of supply
States that the quantity supplied of a good or service is directly related to its price; when price goes up, quantity supplied goes up.
Elasticity of supply
A measure of how great a change occurs in quantity supplied as a result of a change in price.
Ease of production
The sole determinant or factor that impacts supply elasticity.
Price
The monetary value of a product as established by supply and demand.
Rationing
A system where a government agency decides who gets what based on criteria other than people's ability to pay.
Advantages of a price system
Characteristics including being natural/fair (favoring neither party), flexible (allowing quick adjustments to shocks), and free (not requiring administration).