Ch 3: Economics: Supply and Demand Flashcards

A set of vocabulary flashcards covering the fundamental concepts of supply, demand, and market equilibrium as presented in Chapter 3 of Krugman and Wells' Economics/Macroeconomics text.

Competitive market

A market in which there are many buyers and sellers of the same good or service, none of whom can influence the price at which the good or service is sold.

Supply and demand model

A model of how a competitive market works, consisting of five key elements: the demand curve, the supply curve, the set of factors that cause curves to shift, the market equilibrium, and the way the equilibrium changes when curves shift.

Demand schedule

A table that shows how much of a good or service consumers will want to buy at different prices.

Quantity demanded

The actual amount of a good or service consumers are willing to buy at some specific price.

Demand curve

A graphical representation of the demand schedule, showing the relationship between quantity demanded and price.

Law of demand

The principle that, other things equal, a higher price for a good or service leads people to demand a smaller quantity of 그 good or service.

Shift of the demand curve

A change in the quantity demanded at any given price, represented by the change of the original demand curve to a new position, denoted by a new demand curve.

Movement along the demand curve

A change in the quantity demanded of a good that is the result of a change in that good’s price.

Substitutes

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

Complements

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

Normal good

A good for which a rise in income increases the demand for the good.

Inferior good

A good for which a rise in income decreases the demand for the good.

Individual demand curve

A graphical representation showing the relationship between quantity demanded and price for a single consumer.

Market demand curve

The graphical representation of the horizontal sum of the individual demand curves of all consumers in a market.

Congestion pricing

A policy where a charge is imposed on cars entering a city center during business hours to reduce traffic by raising the price of driving.

Supply schedule

A table showing how much of a good or service would be supplied at different prices.

Quantity supplied

The actual amount of a good or service people are willing to sell at some specific price.

Supply curve

A graphical representation showing how much of a good or service people are willing to sell at any given price.

Shift of the supply curve

A change in the quantity supplied of a good at any given price, represented by the change of the original supply curve to a new position.

Movement along the supply curve

A change in the quantity supplied of a good that is the result of a change in that good’s price.

Input

A good that is used to produce another good.

Individual supply curve

A graphical representation showing the relationship between quantity supplied and price for an individual producer.

Market supply curve

The horizontal sum of the individual supply curves of all firms in a market.

Equilibrium price

The price at which the quantity demanded of a good equals the quantity supplied of that good; also referred to as the market-clearing price.

Equilibrium quantity

The quantity of a good bought and sold at the equilibrium price.

Surplus

A situation where the quantity supplied exceeds the quantity demanded, which occurs when the price is above its equilibrium level.

Shortage

A situation where the quantity demanded exceeds the quantity supplied, which occurs when the price is below its equilibrium level.