Chapter 3 Forces of Demand & Supply

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Market

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Any arrangement that brings consumers and producers together

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Competitive Market

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  1. Produce and sell a similar good

  2. Producer / Seller aren’t powerful enough to affect the market price

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Brenden Nguyen
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16 Terms

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Market

Any arrangement that brings consumers and producers together

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Competitive Market

  1. Produce and sell a similar good

  2. Producer / Seller aren’t powerful enough to affect the market price

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Demand

Good or service buyers are willing and able to
purchase at each price

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Quantity Demanded

The total number of units of a good or service buyers are willing to purchase at a given price

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Law of Demand

If price goes up = Demand goes down

If price goes down = Demand goes up

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Movement along the demand curve means

Change in quantity demanded

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Shift in the demand curve means

Change in demand

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Normal Good

A good for which higher income causes an increase in demand

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Inferior Good

A good for which higher income causes a decrease in demand

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Supply

The amount of some good or service a seller is willing to supply at each price

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Quantity Supplied

The total number of units of a good or service sellers are willing to sell at a given price

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Law of Supply

If price goes up = Quantity Supplied goes up

If price goes down = Quantity Supplied goes down

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Shortage

Occurs when Quantity Demanded > Quantity Supplied

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Surplus

Occurs when Quantity Supplied > Quantity Demanded

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Consumer Surplus

The gain from buying something at a price below the highest price you were willing to pay

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Producer Surplus

The extra money a seller makes when they sell something for more than it cost them to produce it