Principles of MacroEconomics- Nelson Chapter 3 MindTap

Market

Any place people come together to trade.

Demand

The willingness and ability of buyers to purchase different quantities of a good at different prices during a specific period.

law of demand

As the price of a good rises, the quantity demanded of the good falls, and as the price of a good falls, the quantity demanded of the good rises, ceteris paribus.

demand schedule

The numerical tabulation of the quantity demanded of a good at different prices. A demand schedule is the numerical representation of the law of demand.

demand curve

The graphical representation of the law of demand.

law of diminishing marginal utility

Over a given period, the marginal (or additional) utility or satisfaction gained by consuming equal successive units of a good will decline as the amount consumed increases.

own price

The price of a good. For example, if the price of oranges is $1, this is its own price.

normal good

A good for which demand rises (falls) as income rises (falls).

inferior good

A good for which demand falls (rises) as income rises (falls).

neutral good

A good for which demand does not change as income rises or falls.

Substitutes

Two goods that satisfy similar needs or desires.

Complements

Two goods that are used jointly in consumption.

Supply

The willingness and ability of sellers to produce and offer to sell different quantities of a good at different prices during a specific period.

law of supply

As the price of a good rises, the quantity supplied of the good rises, and as the price of a good falls, the quantity supplied of the good falls, ceteris paribus.

(upward-sloping) supply curve

The graphical representation of the law of supply.

supply schedule

The numerical tabulation of the quantity supplied of a good at different prices. A supply schedule is the numerical representation of the law of supply.

Subsidies

A monetary payment by government to a producer of a good or service.

Surplus

A condition in which the quantity supplied is greater than the quantity demanded. Surpluses occur only at prices above the equilibrium price.

Shortage

A condition in which the quantity demanded is greater than the quantity supplied. Shortages occur only at prices below the equilibrium price.

equilibrium price

The price at which the quantity demanded of a good equals the quantity supplied.

equilibrium quantity

The quantity that corresponds to the equilibrium price. The quantity at which the amount of the good that buyers are willing and able to buy equals the amount that sellers are willing and able to sell, and both equal the amount actually bought and sold.

disequilibrium price

A price other than the equilibrium price. A price at which the quantity demanded does not equal the quantity supplied.

Disequilibrium

A state of either surplus or shortage in a market.

Equilibrium

Equilibrium means "at rest." Equilibrium in a market is the price-quantity combination from which buyers or sellers do not tend to move away. Graphically, equilibrium is the intersection point of the supply and demand curves.

Consumers' surplus (CS)

The difference between the maximum price a buyer is willing and able to pay for a good or service and the price actually paid. (CS=Maximum buying price-Price paid)

Producers' (or sellers') surplus (PS)

The difference between the price sellers receive for a good and the minimum or lowest price for which they would have sold the good. (PS=Price received-Minimum selling price.)

Total surplus (TS)

The sum of consumers' surplus and producers' surplus. (TS=CS+PS.)

spontaneous order

The spontaneous and unintended emergence of order out of the self-interested actions of individuals; an unintended consequence of human action, with emphasis placed on the word "unintended."

Upward-Sloping Supply Curve

The graphical representation of the law of supply.

Subsidy

A monetary payment by government to a producer of a good or service.

Surplus (Excess Supply)

A condition in which the quantity supplied is greater than the quantity demanded. Surpluses occur only at prices above the equilibrium price.

Shortage (Excess Demand)

A condition in which the quantity demanded is greater than the quantity supplied. Shortages occur only at prices below the equilibrium price.

Equilibrium Price (Market-Clearing Price)

The price at which the quantity demanded of a good equals the quantity supplied.

Producers' (Sellers') Surplus (PS)

The difference between the price sellers receive for a good and the minimum or lowest price for which they would have sold the good. (PS=Price received-Minimum selling price.)