Econ quiz 2 terms

Competitive Market

A market with many buyers and sellers where no single buyer or seller can influence the market price.

Supply and Demand Model

A model that explains how the interaction between buyers and sellers determines the price and quantity of a good in a competitive market.

Supply Schedule

A table showing how much of a good producers are willing to sell at different prices.

Quantity Supplied

The amount of a good or service producers are willing and able to sell at a specific price.

Supply Curve

A graph showing the relationship between the price of a good and the quantity supplied. It usually slopes upward because higher prices encourage producers to supply more.

Shift of the Supply Curve

A change in the quantity supplied at every price caused by something other than the good's own price. An increase in supply shifts the curve right, while a decrease shifts it left.

Movement Along the Supply Curve

A change in quantity supplied caused only by a change in the good's own price. The entire supply curve does not shift.

Input

A resource used to produce goods or services, such as labor, raw materials, machinery, or energy.

Individual Supply Curve

A graph showing the relationship between price and quantity supplied by one producer.

Quantity Demanded

The amount of a good or service consumers are willing and able to buy at a specific price.

Demand Schedule

A table showing how much of a good consumers are willing to buy at different prices.

Demand Curve

A graph showing the relationship between the price of a good and the quantity demanded. It usually slopes downward because consumers buy more when prices fall.

Law of Demand

The principle that, all other things equal, a higher price leads to a lower quantity demanded, while a lower price leads to a higher quantity demanded.

Shift of the Demand Curve

A change in the quantity demanded at every price caused by something other than the good's own price. An increase in demand shifts the curve right, while a decrease shifts it left.

Movement Along the Demand Curve

A change in quantity demanded caused only by a change in the good's own price. The entire demand curve does not shift.

Substitutes

Two goods that consumers can use in place of each other. When the price of one increases, demand for the other usually increases. Example: Coke and Pepsi.

Complements

Two goods that are commonly used together. When the price of one increases, demand for the other usually decreases. Example: Printers and ink cartridges.

Normal Good

A good for which demand increases when consumer income increases and decreases when consumer income decreases.

Inferior Good

A good for which demand decreases when consumer income increases and increases when consumer income decreases. Example: Cheap instant noodles may be an inferior good for some consumers.

Individual Demand Curve

A graph showing the relationship between price and quantity demanded by one consumer.

Equilibrium Price

The price at which quantity supplied equals quantity demanded. Also called the market-clearing price.

Equilibrium Quantity

The quantity of a good bought and sold when the market is at equilibrium, where quantity supplied equals quantity demanded.

Market-Clearing Price

The price at which the quantity demanded equals the quantity supplied, leaving no shortage or surplus. Another name for equilibrium price.

Surplus

A situation where quantity supplied is greater than quantity demanded at the current price. Surpluses put downward pressure on prices.

Shortage

A situation where quantity demanded is greater than quantity supplied at the current price. Shortages put upward pressure on prices.

Price Elasticity of Demand

A measure of how responsive the quantity demanded of a good is to a change in its price. Calculated as the percentage change in quantity demanded divided by the percentage change in price, using the absolute value.

Perfectly Inelastic Demand

A situation where quantity demanded does not change at all when price changes. Elasticity equals 0, and the demand curve is vertical.

Perfectly Elastic Demand

A situation where consumers will buy any amount at one specific price, but none at a higher price. Elasticity is infinite, and the demand curve is horizontal.

Elastic Demand

Demand where the percentage change in quantity demanded is greater than the percentage change in price. Price elasticity of demand is greater than 1. Consumers are very responsive to price changes.

Inelastic Demand

Demand where the percentage change in quantity demanded is smaller than the percentage change in price. Price elasticity of demand is less than 1. Consumers are not very responsive to price changes.

Unit-Elastic Demand

Demand where the percentage change in quantity demanded equals the percentage change in price. Price elasticity of demand equals exactly 1.

Income Elasticity of Demand

A measure of how responsive the quantity demanded of a good is to changes in consumer income. Calculated as the percentage change in quantity demanded divided by the percentage change in income.

Income-Elastic Demand

Demand for a good that increases by a greater percentage than income increases. Income elasticity is greater than 1. Often associated with luxury goods.

Income-Inelastic Demand

Demand for a normal good that increases by a smaller percentage than income increases. Income elasticity is positive but less than 1. Often associated with necessities.

Price Elasticity of Supply

A measure of how responsive the quantity supplied of a good is to changes in its price. Calculated as the percentage change in quantity supplied divided by the percentage change in price.

Perfectly Inelastic Supply

A situation where quantity supplied does not change at all when price changes. Elasticity equals 0, and the supply curve is vertical.

Perfectly Elastic Supply

A situation where producers are willing to supply any quantity at one specific price, but none below that price. Elasticity is infinite, and the supply curve is horizontal.