Supply and Demand Concepts Review

Flashcards covering key vocabulary and concepts related to supply and demand.

Quantity Demanded

The total amount of a good or service that consumers are willing and able to purchase at a given price.

Law of Demand

States that an increase in price results in a decrease in quantity demanded, and vice versa.

Compliments

Two goods that are often consumed together, where the decrease in the price of one increases the demand for the other.

Substitutes

Goods that can replace each other; an increase in the price of one good can lead to an increase in demand for its substitute.

Elastic Demand

A situation where a small change in price leads to a significant change in the quantity demanded.

Inelastic Demand

A situation where a change in price has little or no effect on the quantity demanded.

Market Equilibrium

The point at which quantity demanded equals quantity supplied.

Surplus

Occurs when the quantity supplied exceeds the quantity demanded at a given price.

Shortage

Occurs when the quantity demanded exceeds the quantity supplied at a given price.

Substitution Effect

The economic principle that consumers will replace more expensive items with less expensive alternatives.

Diminishing Marginal Utility

The decrease in added satisfaction as more units of a good are consumed.

Demand Schedule

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

Supply Curve

A graphical representation of the relationship between the price of a good and the quantity supplied.

Price Ceiling

A maximum legal price that can be charged for a good or service.

Price Floor

A minimum legal price that can be charged for a good or service.

Market Structure

The organizational and other characteristics of a market that influence the nature of competition within it.