Chapter 4: The Market Forces of Supply and Demand

A comprehensive set of vocabulary flashcards covering the fundamental concepts of supply, demand, market competition, and equilibrium as presented in Chapter 4 of the lecture notes.

Market

A group of buyers and sellers of a particular product.

Competitive Market

A market where there are many buyers and many sellers, such that each has a negligible or minimal effect on the market price.

Perfectly Competitive Market

A market characterized by two conditions: all goods are exactly the same, and buyers and sellers are so numerous that no one can affect the market price.

Price Takers

Buyers and sellers in a perfectly competitive market who must accept the market price as given, as they have no individual influence over it.

Quantity Demanded

The amount of a good that buyers are willing and able to purchase, often denoted as $QD$.

Law of Demand

The claim that, other things being equal, the quantity demanded ($QD$) of a good falls when the price of the good rises.

Ceteris Paribus

A Latin phrase meaning "other things being equal," used to indicate that all variables except the ones being studied are held constant.

Demand Schedule

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

Demand Curve

A graph showing the relationship between the price of a good and the quantity demanded; it typically reflects an inverse relationship with a downward slope.

Market Demand

The sum of all the quantities demanded by all buyers at each price level.

Normal Good

A good for which demand is positively related to income, meaning demand increases as income rises.

Inferior Good

A good for which demand is negatively related to income, meaning demand decreases as income rises.

Substitutes

Two goods for which an increase in the price of one leads to an increase in the demand for the other.

Complements

Two goods for which an increase in the price of one leads to a fall in the demand for the other.

Quantity Supplied

The amount of any good that sellers are willing and able to sell, often denoted as $QS$.

Law of Supply

The claim that, other things being equal, the quantity supplied ($QS$) of a good rises when the price of the good rises.

Supply Schedule

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

Supply Curve

A graph showing the relationship between the price of a good and the quantity supplied; it typically reflects a positive relationship with an upward slope.

Market Supply

The sum of the quantities supplied by all sellers at each price level.

Input Prices

The costs of factors used in production, such as wages for labor and the prices of raw materials.

Equilibrium

The situation where the market price has reached the level where quantity supplied equals quantity demanded.

Equilibrium Price

The price that equates the quantity supplied with the quantity demanded, found where the supply and demand curves intersect.

Equilibrium Quantity

The quantity supplied and the quantity demanded at the equilibrium price.

Surplus

A situation of excess supply where the quantity supplied is greater than the quantity demanded, typically occurring when the price is above the equilibrium level.

Shortage

A situation of excess demand where the quantity demanded is greater than the quantity supplied, typically occurring when the price is below the equilibrium level.

Change in Supply

A shift of the supply curve inward or outward caused by a change in a non-price determinant, such as technology or input prices.

Change in the Quantity Supplied

A movement along a fixed supply curve that occurs when the price of the good changes.

Change in Demand

A shift of the demand curve caused by a change in a non-price determinant, such as income, tastes, or the number of buyers.

Change in the Quantity Demanded

A movement along a fixed demand curve that occurs when the price of the good changes.