chapter 3: Macroeconomics: Demand, Supply, and Market Equilibrium

These flashcards cover key concepts from the Macroeconomics lecture on demand, supply, and market equilibrium.

What is the role of a firm in economics?

A firm is an organization created to produce goods or services to meet perceived demand.

What do households represent in an economy?

Households are the consuming units in an economy, acting as suppliers of labor and buyers of goods and services.

What is the difference between input markets and output markets?

Input markets are where resources used in production are exchanged, while output markets are where goods and services are exchanged.

What factors can shift the demand curve?

Factors include income, tastes and preferences, expectations about future prices, and the prices of other goods.

Define quantity demanded.

Quantity demanded is the amount of a product that a household would buy in a given period if it could buy all it wanted at the current market price.

What is the Law of Demand?

The Law of Demand states that there is a negative relationship between price and quantity demanded, ceteris paribus.

What distinguishes a movement along a demand curve from a shift in the demand curve?

A movement along a demand curve occurs due to a change in the price of the good, while a shift in the demand curve occurs due to changes in other factors like income or preferences.

What is market demand?

Market demand is the sum of all the quantities of a good or service demanded by all households in the market.

What is the Law of Supply?

The Law of Supply states that an increase in market price, ceteris paribus, will lead to an increase in quantity supplied.

Explain market equilibrium.

Market equilibrium is the condition when quantity supplied equals quantity demanded, and there is no tendency for the price to change.

What happens when there is excess demand in a market?

Excess demand, or shortage, occurs when quantity demanded exceeds quantity supplied at the current price, leading to a tendency for price to rise.

What are substitutes in economics?

Substitutes are goods that can replace one another; when the price of one increases, the demand for the other increases.

What are complements in economics?

Complements are goods that are used together; a decrease in the price of one leads to an increase in demand for the other.

What are normal goods?

Normal goods are goods for which demand increases when income increases and decreases when income decreases.

What are inferior goods?

Inferior goods are goods for which demand tends to fall when income rises.

What distinguishes a shift in supply curve from a movement along the supply curve?

A shift in the supply curve occurs due to changes in factors other than price, while a movement along the supply curve occurs due to a change in the price of the good.