# Microeconomics Chapter 3

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Perfectly Competitive Market

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## Description and Tags

### 21 Terms

1

Perfectly Competitive Market

All Goods exactly the same

Buyers & sellers ao numerous that no one can affect market price— each is a “Price Taker”

Agents have NO Market Power

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2

Quantity Demanded

The amount of good that buyers are willing and able to purchase

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3

Law of Demand

the claim that quantity demanded of a good falls, when the price of the good rises, other things equal

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4

Demand Schedule

a table that shows the relationship between the price of a good and the quantity demanded

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5

Demand for a Normal Good

Is positively related to income

Increase in income cause increase in quantity demanded at each price , Shift D curves to the right

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6

Demand for a inferior good

Is negatively related income

An increase in income shifts D curve for inferior goods to the left

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7

Substitutes

Two goods are substitues if an increase in the price of one causes an increase in demand for the other.

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8

Complements

Two goods are Complements if an increase in the price of one causes a fall in demand for the other

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9

Quantity Supplied

The Quantity Supplied of any good is the amount that sellers are willing and able to sell

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10

Law of Supply

the claim that quantity supplied of a good rises when the price of the good rises, other things equal

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11

Supply Schedule

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

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12

Equilibrium Price

that price that equates quantity supplied and quantity demanded

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13

Equilibrium Quantity

The Quantity Supplied and Quantity Demanded at the equilibrium price

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14

Surplus (a.k.a. excess supply)

When Quantity Supplied is greater than Quantity Demanded.

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15

Shortage (a.k.a. excess demand)

When Quantity Demanded is greater than Quantity Supplied

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16

Change in Supply

A shift in the S curve occurs when a non-price determinant of supply changes (like technology or costs)

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17

Change in Quantity Supplied

a movement along a fixed S (supply) curve occurs when P (price) changes

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18

Change in Demand

a shift in the D (demand) curve occurs when a non-price determinant of demand changes (like income or # of buyers)

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19

Change in Quantity Demanded

a movement along a fixed D curve occurs when P changes

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20

Price Ceiling

a legal maximum on the price of a good or service

Example: Rent Control

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21

Price Floor

a legal minimum on the price of a good or service

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