Principles of Macroeconomics - Chapter 4: The Market Forces of Supply and Demand

These flashcards cover key terms and concepts related to the market forces of supply and demand as per the provided lecture notes.

Market

A group of buyers and sellers of a particular good or service.

Competitive Market

A market in which there are many buyers and sellers, each having a negligible impact on market price.

Perfectly Competitive Market

A market where goods offered for sale are all exactly the same, and no single buyer or seller has influence over the market price.

Quantity Demanded

The amount of a good that buyers are willing and able to purchase at a particular price during a specified time period.

Law of Demand

When the price of a good rises, the quantity demanded falls, and when the price falls, the quantity demanded rises, all other factors remaining equal.

Demand Curve

A graph that shows the relationship between the price of a good and the quantity demanded.

Market Demand

The sum of all individual demands for a particular good or service.

Demand Curve Shifter

Non-price determinants that, when changed, result in a shift of the demand curve.

Normal Good

A good for which demand increases as income increases.

Inferior Good

A good for which demand decreases as income increases.

Substitutes

Goods that can be used in place of each other; an increase in the price of one will increase demand for the other.

Complements

Goods that are used together; an increase in the price of one will decrease demand for the other.

Surplus

A situation where quantity supplied exceeds quantity demanded resulting in excess supply.

Shortage

A situation where quantity demanded exceeds quantity supplied resulting in excess demand.

Equilibrium Price

The price at which the quantity demanded equals the quantity supplied.

Law of Supply and Demand

The claim that the price of any good adjusts to bring the quantity supplied and quantity demanded into balance.

Supply Curve

A graph that shows the relationship between the price of a good and the quantity supplied.