Guide and Assessment_ Demand, Supply, and Prices

Demand

The desire to own something and the ability to pay for it.

Quantity Demanded

The amount of a product that buyers are willing and able to purchase at a given price.

Substitutes

Products that can replace each other; an increase in the price of one may increase the demand for the other.

Elastic Demand

Demand that is sensitive to price changes; a price increase leads to a significant drop in quantity demanded.

Inelastic Demand

Demand that is not sensitive to price changes; a price increase does not significantly change the quantity demanded.

Supply

The amount of a good or service that is available for sale.

Quantity Supplied

The amount of a product that producers are willing and able to sell at a given price.

Marginal Cost

The cost of producing one additional unit of a good or service.

Marginal Revenue

The additional income from selling one more unit of a good or service.

Equilibrium Price

The price at which the quantity demanded equals the quantity supplied.

Price Controls

Government regulations that set the minimum or maximum price for a good or service.

Shift in Demand

When the demand curve moves to the left or right due to changes in consumer behavior.

Elasticity

The sensitivity of demand to price changes.

Supply Shock

An unexpected event that suddenly changes the supply of a product or service.

High Demand Elasticity

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

Low Demand Elasticity

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

Price Floor

A minimum price set by the government that must be paid for a good or service.

Subsidy

Financial assistance given by the government to support a business or economy.

Demand Curve

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

Supply Curve

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

Factors of Production

Resources used to produce goods and services, such as labor, land, and capital.

Market Equilibrium

The point where supply equals demand; the market is in balance.

Disequilibrium

A situation where quantity demanded does not equal quantity supplied.

Income Effect

The change in quantity demanded due to a change in consumer income.

Substitution Effect

The change in quantity demanded due to the change in the relative price of a good.

Government Action

Policies or regulations set by the government that affect market operations.

Flexible Prices

Prices that can adjust based on market conditions.

Efficiency in Resource Allocation

Using resources in a way that maximizes the production of goods and services.

Competitive Market

A market where many buyers and sellers compete to provide goods and services.

Income Changes

Variations in consumer income that affect their purchasing power.

Consumer Expectations

What consumers anticipate about future prices and availability of products.

Population Changes

Variations in the number of people or demographic characteristics that can affect demand.

Luxury Goods

Products not essential for living that consumers buy more of as incomes rise.

Necessity Goods

Products essential for living; demand remains constant regardless of price changes.

Rationing

Allocating scarce resources or goods to consumers, often through non-price means.

Price System

The mechanism through which prices are determined in the market.