The Market Forces of Supply and Demand

These flashcards cover key vocabulary and concepts related to supply and demand as discussed in the lecture notes.

Market

A group of buyers and sellers of a particular good or service.

Demand

The quantity of a good that buyers are willing and able to purchase at various prices.

Supply

The quantity of a good that sellers are willing and able to sell at various prices.

Law of Demand

The principle stating that, other things being equal, the quantity demanded falls when the price rises and vice versa.

Demand Curve

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

Market Demand

The sum of all individual demands for a good or service.

Perfectly Competitive Market

A market in which all goods are identical and many buyers and sellers exist, making them price takers.

Non-price Determinants of Demand

Factors that can shift the demand curve other than the price of the good itself.

Normal Good

A good whose demand increases as consumer income rises.

Inferior Good

A good whose demand decreases as consumer income rises.

Substitutes

Goods that can replace each other; an increase in the price of one leads to an increase in demand for the other.

Complements

Goods that are consumed together; an increase in the price of one leads to a decrease in the demand for the other.

Law of Supply

The principle stating that, other things being equal, the quantity supplied rises when the price rises and vice versa.

Supply Curve

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

Market Supply

The sum of all individual suppliers' quantities supplied at each price.

Surplus

A situation where the quantity supplied of a good exceeds the quantity demanded.

Shortage

A situation where the quantity demanded of a good exceeds the quantity supplied.

Equilibrium Price

The price at which quantity supplied equals quantity demanded.

Economic Signals

Prices that provide information to buyers and sellers, guiding their economic decisions.