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ceteris paribus
other things being equal
complements
goods that are often used together so that consumption of one good tends to enhance consumption of the other
consumer surplus
The extra benefit consumers get from a good or service, measured by the difference between what they would have paid and what they actually paid.
deadweight loss
the loss in social surplus that occurs when a market produces an inefficient quantity
demand
the relationship between price and the quantity demanded of a certain good or service
demand curve
A graph showing the relationship between price and quantity demanded, with quantity on the horizontal axis and price on the vertical axis.
demand schedule
a table that shows a range of prices for a certain good or service and the quantity demanded at each price
equilibrium
occurs when quantity demanded equals quantity supplied, resulting in no economic pressure from surpluses or shortages.
equilibrium price
the price where quantity demanded is equal to quantity supplied
equilibrium quantity
the quantity at which quantity demanded and quantity supplied are equal for a certain price level
excess demand
at the existing price, the quantity demanded exceeds the quantity supplied; also called a shortage
excess supply
at the existing price, quantity supplied exceeds the quantity demanded; also called a surplus
factors of production
the resources such as labor, materials, and machinery that are used to produce goods and services; also called inputs
inferior good
a good in which the quantity demanded falls as income rises, and in which quantity demanded rises and income falls
inputs
the resources such as labor, materials, and machinery that are used to produce goods and services; also called factors of production
law of demand
Higher prices typically lead to lower quantities demanded, while lower prices result in higher quantities demanded, assuming all other factors remain constant.
law of supply
Higher prices lead to greater quantity supplied, while lower prices lead to lower quantity supplied, holding other factors constant.
normal good
a good in which the quantity demanded rises as income rises, and in which quantity demanded falls as income falls
price
what a buyer pays for a unit of the specific good or service
price ceiling
a legal maximum price
price control
government laws to regulate prices instead of letting market forces determine prices
price floor
a legal minimum price
producer surplus
Producers' extra benefit from selling a good or service, calculated by the actual price received minus the minimum price they would accept.
quantity demanded
the total number of units of a good or service consumers are willing to purchase at a given price
quantity supplied
the total number of units of a good or service producers are willing to sell at a given price
shift in demand
when a change in some economic factor (other than price) causes a different quantity to be demanded at every price
shift in supply
when a change in some economic factor (other than price) causes a different quantity to be supplied at every price
shortage
at the existing price, the quantity demanded exceeds the quantity supplied; also called excess demand
social surplus
the sum of consumer surplus and producer surplus; also total surplus and economic surplus
substitute
a good that can replace another to some extent, so that greater consumption of one good can mean less of the other
supply
the relationship between price and the quantity supplied of a certain good or service
supply curve
a line that shows the relationship between price and quantity supplied on a graph, with quantity supplied on the horizontal axis and price on the vertical axis
supply schedule
a table that shows a range of prices for a good or service and the quantity supplied at each price
surplus
at the existing price, quantity supplied exceeds the quantity demanded; also called excess supply
