Studied by 2 people
competitive market
there are many buyers and sellers of the same good or service, none of whom can influence the price at which the good/service is sold
supply and demand model
show how a competitive market works
demand schedule
shows how much of a good/service consumers will be willing and able to buy at different prices
quantity demanded
actual amount of good or service consumers are willing and able to buy at some specific price; shown as a single point in a demand schedule or along a demand curve
demand curve
shows the relationship between quantity demanded and price
law of demand
a higher price for a good/service? all other things being equal, leads people to demand a smaller quantity of that good
change in demand
changed the quantity demanded at any given price
substitute
a rise in the price of one of the goods leads to an increase in the demand for the other good
complements
a rise in price of one of the goods leads to a decrease in the demand of the other good
normal good
when a rise in income increases the demand for a good
inferior good
when a rise in income decreases the demand for a good
individual demand curve
illustrates the relationship between a quantity demanded and price for an individual consumer
quantity supplied
the actual amount of a good/service people are willing to sell at some specific price
supply schedule
shows how much a good/serive producers would supply at different prices
supply curve
shows the relationship between the quantity supplied and the price
law of suppky
other things being equal, the price and quantity supplied of a good are positively related
a change in suppky
changed the quantity supplied at any given time
input
a good/serive that is used to produce another good/service
individual suppky curve
relationship between quantity supplied and price for an individual producer
equilibrium
no individual would be better off doing smth different
equilibrium price
quantity demanded of a good equals the quantity supplied of that good. also called market-clearing price
equilibrium quantity
quantity of good bought and sold when price of quantity demanded equals the quantity supplied of that good
surplus
quantity supplied exceeds the quantity demanded; occurs when price is over equilibrium level
shortage
good/service when the quantity demanded exceeds the quantity supplied; occur when price is below equilibrium level
price control
legal restrictions on how highl or low a market price may go
price ceiling
maximum price sellers are allow to charge for a good/service
price floor
minimum price buyers are required to pay for a good/service
inefficient allocation to consumers
people who want the food badly and are willing to pay high price don’t get it but people who care relatively little about it and willing to pay low price get it
wasted resources
people expend money, effort, and time to cope w shortage caused by price ceiling
inefficiently low quality
sellers offer low quality goods at a low price even though buyers would prefer higher quality at a higher price
black market
goods/services are brought and sold illegally; either bc it is illegal to sell them at all or bc the price charged are legally prohibited by a price ceiling
minimum wage
legal floor on the hourly wage rate paid for a worker’s labor
inefficient allocation of sales among sellers
those who would be willing to sell the good at the lowest price are not always those who manage to sell it
inefficiently high quality
sellers offer high quality goods at a high price, even buyers would prefer a lower quality at a lower price
quantity control
upper limit on the quantity of some good that can be brought or sold
license
gives its owner the right to supply a good/service
demand price
given quantity is the price at which consumers will demand that quantity
supply price
given quantity is the price at which producers will supply that quantity
wedge
the price hair by buyers ends up being higher than that received by sellers
quota rent
difference between the he demand and suppky pride at the quota amount. the earning that accrue to the license hold a from ownership of the right to self good. i don’t yak to the market price of the license when the licenses are trade
deadweight loss
value of forgone mutually beneficial transactions
intermediate price
an increase in supply decrease price while an increase in demand will increase price
disquilibrium
a situation in which a market or economy is not operating efficiently and is in a state of imbalance
determinant of demand
income, price, tastes and preferences, prices of related goods and services, and expectations
