Economics Chapter 3 & 7: Supply, Demand, and Unemployment

A complete vocabulary set covering key economic definitions from Chapter 3 (Supply and Demand) and Chapter 7 (Unemployment).

Market

A place where buyers and sellers meet, which does not have to be a physical place.

Quantity Demanded

The amount of a good or service that consumers are willing and able to buy.

Law of Demand

The principle that there is a negative relationship between price and quantity demanded (Price ↑ → Quantity demanded ↓; Price ↓ → Quantity demanded ↑).

Change in Quantity Demanded

A movement along the demand curve caused by a change in the price of the good.

Change in Demand

A shift of the entire demand curve left or right caused by a change in a nonprice factor.

Normal Good

A good that consumers buy more of when their income increases.

Inferior Good

A good that consumers buy less of when their income increases.

Complements

Two goods that are used together, where an increase in the price of one decreases demand for the other.

Substitutes

Goods that can be used in place of each other.

Quantity Supplied

The amount producers are willing and able to sell at a specific price.

Law of Supply

The principle that there is a positive relationship between price and quantity supplied (Price ↑ → Quantity supplied ↑; Price ↓ → Quantity supplied ↓).

Change in Quantity Supplied

A movement along the supply curve caused by a change in the price of the good.

Change in Supply

A shift in the entire supply curve caused by a change in a nonprice factor.

Inputs

Resources used in the production process.

Equilibrium Price

The price where quantity supplied equals quantity demanded.

Equilibrium Quantity

The quantity where quantity supplied equals quantity demanded.

Work-eligible Population

The civilian, noninstitutionalized population age 16 or older.

Labor Force

The total number of people counted as employed plus unemployed.

Employed

Someone who works at least 1 hour for pay, works at least 1 hour in their own business/profession, or is temporarily absent from work.

Unemployed

Someone without work who is available for work and has made an effort to find work within the last 4 weeks, or is temporarily laid off and expecting to be called back.

Unemployment Rate

The percentage of the labor force that is unemployed.

Labor Force Participation Rate (LFPR)

The percentage of the work-eligible population that is in the labor force.

Structural Unemployment

Unemployment caused by changes in the industrial makeup of the economy.

Creative Destruction

The process where new products and technologies lead to the end of other industries and jobs, causing structural unemployment.

Frictional Unemployment

Unemployment caused by delays in matching available jobs and workers.

Cyclical Unemployment

Unemployment caused by an economic contraction or downturn.

Natural Rate of Unemployment

The typical unemployment rate that occurs when the economy is growing normally, equal to structural unemployment plus frictional unemployment.

Discouraged Workers

People who aren't working, have looked for a job in the past 12 months, are willing to work, but haven't searched during the past 4 weeks.

Underemployed Workers

People who have part-time jobs but would prefer full-time work, who are counted as employed in official metrics.

Leading Indicator

An economic indicator that helps predict what is coming and usually changes before the economy as a whole.

Lagging Indicator

An economic indicator that usually changes after the economy as a whole changes and has less predictive power.