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capital market
complements, complementary goods
Goods that āgo togetherā; a decrease in the price of one results in an increase in demand for the other and vice versa.
demand curve
A graph illustrating how much of a given product a household would be willing to buy at different prices.
entrepreneur
A person who organizes, manages, and assumes the risks of a firm, taking a new idea or a new product and turning it into a successful business.
equilibrium
The condition that exists when quantity supplied and quantity demanded are equal. At equilibrium, there is no tendency for price to change.
excess demand or shortage
The condition that exists when quantity demanded exceeds quantity supplied at the current price.
excess supply or surplus
The condition that exists when quantity supplied exceeds quantity demanded at the current price.
factors of production
The inputs into the production process. Land, labor, and capital are the three key factors of production.
firm
An organization that comes into being when a person or a group of people decides to produce a good or service to meet a perceived demand.
households
The consuming units in an economy
income
The sum of all a householdās wages, salaries, profits, interest payments, rents, and other forms of earnings in a given period of time. It is a flow measure.
inferior goods
Goods for which demand tends to fall when income rises.
input or factor markets
The markets in which the resources used to produce goods and services are exchanged.
labor market
The input/factor market in which households supply work for wages to firms that demand labor.
law of demand
The negative relationship between price and quantity demanded: Ceteris paribus, as price rises, quantity demanded decreases; as price falls, quantity demanded increases.
law of supply
The positive relationship between price and quantity of a good supplied: An increase in market price will lead to an increase in quantity supplied, and a decrease in market price will lead to a decrease in quantity supplied.
market demand
The sum of all the quantities of a good or service demanded per period by all the households buying in the market for that good or service.
market supply
The sum of all that is supplied each period by all producers of a single product.
movement along a demand curve
The change in quantity demanded brought about by a change in price.
movement along a supply curve
The change in quantity supplied brought about by a change in price.
normal goods
Goods for which demand goes up when income is higher and for which demand goes down when income is lower.
perfect substitutes
Identical products.
profit
The difference between total revenue and total cost.
quantity demanded
The amount (number of units) of a product that a household would buy in a given period if it could buy all it wanted at the current market price.
quantity supplied
The amount of a particular product that a firm would be willing and able to offer for sale at a particular price during a given time period.
shift of a demand curve
The change that takes place in a demand curve corresponding to a new relationship between quantity demanded of a good and price of that good. The shift is brought about by a change in the original conditions.
shift of a supply curve
The change that takes place in a supply curve corresponding to a new relationship between quantity supplied of a good and the price of that good. The shift is brought about by a change in the original conditions.
substitutes
Goods that can serve as replacements for one another; when the price of one increases, demand for the other increases.
supply curve
A graph illustrating how much of a product a firm will sell at different prices.
supply schedule
Shows how much of a product firms will sell at alternative prices.
wealth or net worth
The total value of what a household owns minus what it owes. It is a stock measure
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