Econ Chapter 3: Demand and Supply

A complete set of vocabulary flashcards covering demand and supply laws, schedules, curves, shifts, and determinants from Chapter 3 Economics notes.

Ceteris Paribus

A Latin phrase meaning "holding everything else constant."

Law of Demand

The rule stating that, ceteris paribus (holding everything else constant), when the price of a product falls, the quantity demanded will increase; when the price of a product rises, the quantity demanded will decrease.

Demand Schedule

A table showing the relationship between the price of a product and the quantity of the product demanded.

Demand Curve

A downward-sloping curve that illustrates the inverse relationship between the price of a product and the quantity demanded.

Normal Good

Any product or service where consumer demand increases when people make more money (income increases).

Inferior Good

A product or service where consumer demand decreases when income increases, or demand increases when income decreases.

Substitutes (in Demand)

Goods for which a change in the price of Good A causes the demand for Good B to change in the same direction.

Complements (in Demand)

Goods for which a change in the price of Good A causes the demand for Good B to change in the opposite direction.

Change in Quantity Demanded

A movement along the same demand curve caused specifically by a change in the price of the product.

Change in Demand

A shift of the entire demand curve caused by a change in a factor other than the price of the product.

Change in Demand vs. Change in Quantity Demanded

A movement along the demand curve represents a change in quantity demanded due to a price change, whereas a shift of the demand curve represents a change in demand due to non-price factors.

Factors that Shift Market Demand

Non-price determinants of demand: income (normal and inferior goods), prices of related goods (substitutes and complements), tastes and preferences, population and demographics, expected future prices, and natural disasters/pandemics.

Law of Supply

The rule stating that, ceteris paribus (holding everything else constant), when the price of a product falls, the quantity supplied will decrease; when the price of a product rises, the quantity supplied will increase.

Supply Schedule

A table showing the relationship between the price of a product and the quantity of the product supplied.

Supply Curve Slope

Upward sloping, reflecting that producers desire higher prices so they can produce and sell more to increase revenue.

Change in Quantity Supplied

A movement along the same supply curve caused specifically by a change in the price of the product.

Change in Supply

A shift of the entire supply curve caused by a change in a non-price factor of production.

Change in Supply vs. Change in Quantity Supplied

A movement along the supply curve is a change in quantity supplied caused by price, whereas a shift of the supply curve is a change in supply caused by non-price factors.

Factors that Shift Market Supply

Non-price determinants of supply: prices of inputs, technological change, prices of related goods in production, number of firms in the market, expected future prices, and natural disasters/pandemics.

Right-hand Shift in Supply (Increase in Supply)

A rightward shift of the supply curve caused by decreasing input prices, positive technological change, an increase in the number of firms, or firm expectations that future prices will fall.

Substitutes in Production

Alternative goods that a firm can produce; a price decrease in one good prompts producers to reallocate resources toward the substitute good, shifting its supply curve to the right.