Chapter 4: Demand, Supply, and Market Equilibrium Vocabulary

Vocabulary flashcards defining fundamental microeconomic concepts of demand, supply, and market equilibrium.

Perfectly competitive market

A market with many buyers and sellers of a homogeneous product and no barriers to entry.

Quantity demanded

The amount of a product that consumers are willing and able to buy.

Demand schedule

A table that shows the relationship between the price of a product and the quantity demanded, ceteris paribus.

Individual demand curve

A curve that shows the relationship between the price of a good and quantity demanded by an individual consumer, ceteris paribus.

Law of demand

There is a negative relationship between price and quantity demanded, ceteris paribus.

Change in quantity demanded

A change in the quantity consumers are willing and able to buy when the price changes; represented graphically by movement along the demand curve.

Market demand curve

A curve showing the relationship between price and quantity demanded by all consumers, ceteris paribus.

Quantity supplied

The amount of a product that firms are willing and able to sell.

Supply schedule

A table that shows the relationship between the price of a product and the quantity supplied, ceteris paribus.

Law of supply

There is a positive relationship between price and quantity supplied, ceteris paribus.

Minimum supply price

The lowest price at which a product will be supplied.

Change in quantity supplied

A change in the quantity firms are willing and able to sell when the price changes; represented graphically by movement along the supply curve.

Market supply curve

A curve showing the relationship between price and quantity supplied by all firms, ceteris paribus.

Market equilibrium

A situation in which the quantity demanded equals the quantity supplied at the prevailing market price.

Excess demand

A situation in which, at the prevailing price, the quantity demanded exceeds the quantity supplied.

Excess supply

A situation in which the quantity supplied exceeds the quantity demanded at the prevailing price.

Change in demand

A shift of the demand curve caused by a change in a variable other than the price of the product.

Normal good

A good for which an increase in income increases demand.

Inferior good

A good for which an increase in income decreases demand.

Substitutes

Two goods for which an increase in the price of one good increases the demand for the other good.

Complements

Two goods for which a decrease in the price of one good increases the demand for the other good.

Change in supply

A shift of the supply curve caused by a change in a variable other than the price of the product.