Economics: Supply, Demand, and Market Equilibrium

Vocabulary practice flashcards generated from the lecture transcript on introductory microeconomics, covering market definitions, supply, demand, equilibrium, and shift vs. movement factors.

Market

A setting where buyers and sellers exchange money for goods or services.

Demand

The willingness to pay for a good or service combined with the ability to afford it.

Ceteris Paribus

A Latin phrase meaning 'all things equal' or 'nothing else changes,' used to isolate the effect of changing one variable in a mental experiment while holding all other factors frozen.

Law of Demand

The principle stating that, ceteris paribus, there is an inverse or negative relationship between price and quantity demanded; as price goes up, quantity demanded goes down.

Demand Curve

A graph showing the negative relationship between price on the vertical axis and quantity demanded on the horizontal axis, typically downward sloping.

Supply

The willingness and ability of sellers to exchange goods or services for money.

Law of Supply

The principle stating that, ceteris paribus, there is a direct or positive relationship between price and quantity supplied; as price goes up, quantity supplied goes up.

Supply Curve

A graph illustrating the direct relationship between price on the vertical axis and quantity supplied on the horizontal axis, typically upward sloping.

Equilibrium

The intersection point of the supply curve and the demand curve, establishing an equilibrium price and equilibrium quantity.

Income

An economic flow variable measured over time, such as hourly wages, biweekly paychecks, or annual salary.

Wealth

An economic stock variable measured at a single moment in time, representing total net worth or total funds in an account.

Tastes and Preferences

A catch-all term for a buyer's opinion of product quality or perceived benefits that affects willingness to purchase.

Substitutes

Related goods that replace each other in consumption, competing for the same consumer dollars.

Complements

Related goods that are consumed together rather than instead of one another.

Expectations

An individual's best guess of what the future looks like, which can cause immediate changes in buying or selling behavior before the future event occurs.

Endogenous Change

A change driven by variables inside the model (price and quantity), resulting in a movement along an existing curve.

Exogenous Change

A change driven by external non-price factors that violate ceteris paribus, causing a shift to an entirely new curve.

Change in Quantity Demanded

A movement along a single demand curve caused strictly by a change in the product's own price.

Change in Demand

A graphical shift to a completely different demand curve caused by a non-price shift factor like income, tastes, wealth, expectations, or prices of related goods.