Supply and Demand

This set of flashcards covers key vocabulary and concepts related to the supply and demand model, focusing on definitions and explanations crucial for understanding competitive markets.

Supply and Demand Model

A model of how a competitive market works, incorporating demand curve, supply curve, equilibrium price and quantity, and shifts in these elements.

Competitive Market

A market with many buyers and sellers offering the same good or service, where no individual can influence the market price.

Demand Curve

A graphical representation showing how much of a good or service consumers are willing to buy at different prices.

Law of Demand

When the price of a good rises, other things being equal, the quantity demanded falls.

Demand Schedule

A table showing how much of a good or service consumers will want to buy at different prices.

Supply Curve

A graphical representation showing how much of a good or service producers are willing to sell at different prices.

Law of Supply

When the price of a good rises, other things being equal, the quantity supplied rises.

Equilibrium Price

The price at which the quantity demanded equals the quantity supplied, also known as the market-clearing price.

Shortage

A situation where quantity demanded exceeds quantity supplied, occurring when the price is below the equilibrium level.

Surplus

A situation where quantity supplied exceeds quantity demanded, occurring when the price is above the equilibrium level.

Shifts of the Demand Curve

Changes in the demand curve due to factors such as changes in consumer preferences, income, or the prices of related goods.

Shifts of the Supply Curve

Changes in the supply curve due to factors such as changes in production costs, technology, or the number of suppliers.