Lecture Notes 4.1–4.3: Demand, Supply, and Market Equilibrium - Vocabulary Flashcards

Vocabulary flashcards covering key concepts from the notes on demand, supply, changes in demand/supply, market equilibrium, surplus, and shortage.

Quantity Demanded

The amount that consumers are willing and able to buy during a specific period at a specific price.

Law of Demand

Holding all else constant, as price rises, quantity demanded falls; as price falls, quantity demanded rises.

Demand Curve

A graph showing the relationship between quantity demanded and price, assuming all other buying plans remain the same.

Market Demand

The total quantity demanded by all buyers in a market.

Change in Demand

A shift of the entire demand curve caused by non-price factors influencing buyers’ plans.

Prices of Related Goods

Prices of substitutes and complements significantly influence the demand for a good, causing the entire demand curve to shift. For substitute goods, an increase in the price of a substitute will lead to an increase in demand for the current good (demand curve shifts right), while a decrease in the substitute's price will decrease demand for the current good (demand curve shifts left). For complementary goods, an increase in the price of a complement will decrease demand for the current good (demand curve shifts left), and a decrease in the complement's price will increase demand for the current good (demand curve shifts right).

Expected Future Prices

Expectations about future prices can affect current demand; higher expected future prices can raise current demand, but lower future demand.

Income

Income changes demand: higher income increases demand for normal goods and decreases demand for inferior goods.

Expected Future Income and Credit

Expectations of higher income or easier borrowing can raise demand for some goods and services. Mainly for living expenses like mortgages and car loans.

Number of Buyers

More buyers in the market increase market demand; fewer buyers decrease it.

Preferences/Trends

Changes in tastes or preferences raise demand for some goods and lower it for others.

Substitute Good

A good that can replace another; demand for a substitute and the current good tend to move in the same direction as the substitute’s price changes.

Complement Good

A good that is often consumed with another; demand for complements and the current good move in opposite directions.

Change in Quantity Demanded

A movement along the demand curve caused by a change in the price of the good, holding other factors constant.

On-Graph Movement vs. Shift (Demand)

Shifts up/down the demand curve indicate a change in demand; movement along the curve indicates a change in quantity demanded.

Quantity Supplied

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

Law of Supply

Holding all else constant, as price rises, quantity supplied rises; as price falls, quantity supplied falls.

Supply

The relationship between quantity supplied and price when other influences stay the same, shown in a schedule and graph.

Supply Curve

A graph of the relationship between quantity supplied and price, with other factors held constant.

Market Supply

The sum of the supplies of all sellers in the market.

Changes in Supply

When non-price influences on selling plans change, leading to a new supply schedule and curve.

Prices of Resources and Other Inputs

Higher input costs reduce supply; lower input costs increase supply.

Prices of a Substitute in Production

If the price of a substitute in production rises, supply of the current good decreases; if it falls, supply can increase.

Prices of a Complement in Production

If the price of a production complement rises, supply of the current good increases; if it falls, supply decreases.

Expected Future Prices (Supply)

Expectations about future prices influence current supply decisions.

Number of Sellers

More sellers increase supply; fewer sellers decrease supply.

Productivity

Increased productivity lowers costs and raises the supply of the good.

Change in Quantity Supplied

A movement along the supply curve caused by a price change, holding other factors constant.

Change in Supply

A shift of the supply curve due to non-price factors affecting selling plans.

The Law of Market Forces

In a surplus, the price falls; in a shortage, the price rises.

Surplus

Quantity supplied exceeds quantity demanded.

Shortage

Quantity demanded exceeds quantity supplied.