Ch. 3 Key Terms - Principles of Microeconomics 3e | OpenStax

Ceteris Paribus

A Latin phrase meaning 'other things being equal,' referring to the practice of holding all other relevant factors constant when analyzing a specific relationship.

Complements

Goods that are often used together, such that a price increase for one leads to a decrease in demand for the other.

Consumer Surplus

The economic measure of consumer benefit, calculated as the maximum amount a buyer is willing to pay minus the amount actually paid.

Deadweight Loss

The loss in total social surplus that occurs when a market operates at an inefficient quantity.

Demand

The relationship between the price of a good or service and the quantity demanded by consumers at that price.

Demand Curve

A graph showing the relationship between price on the vertical axis and quantity demanded on the horizontal axis.

Demand Schedule

A table showing the quantity demanded of a good or service at various specific price levels.

Equilibrium

The situation where quantity demanded equals quantity supplied at the intersection of the demand and supply curves.

Equilibrium Price

The price level at which quantity demanded by consumers equals quantity supplied by producers.

Equilibrium Quantity

The quantity of a good or service bought and sold at the equilibrium price.

Excess Demand

A situation where quantity demanded exceeds quantity supplied at the existing price, also known as a shortage.

Excess Supply

A situation where quantity supplied exceeds quantity demanded at the existing price, also known as a surplus.

Factors of Production

The resources such as labor, materials, and machinery used to produce goods and services, also known as inputs.

Inferior Good

A good for which demand decreases as consumer income increases, and demand increases as consumer income falls.

Law of Demand

The rule that, ceteris paribus, a higher price leads to a lower quantity demanded and a lower price leads to a higher quantity demanded.

Law of Supply

The rule that, ceteris paribus, a higher price leads to a higher quantity supplied and a lower price leads to a lower quantity supplied.

Normal Good

A good for which demand rises as consumer income rises, and demand falls as consumer income falls.

Price Ceiling

A legal maximum price that sellers are allowed to charge for a good or service.

Price Control

Government regulations enforced to set or restrict market prices rather than letting market forces determine them.

Price Floor

A legal minimum price that must be paid for a good or service.

Producer Surplus

The economic measure of producer benefit, calculated as the amount a seller receives minus the actual cost of production.

Quantity Demanded

The total number of units of a good or service consumers are willing to purchase at a specific price.

Quantity Supplied

The total number of units of a good or service producers are willing to sell at a specific price.

Social Surplus

The sum of consumer surplus and producer surplus representing total economic welfare.

Substitutes

Goods that can replace one another in consumption, such that a price increase for one leads to an increase in demand for the other.