Economics Definitions

market

market

includes any kind of arrangement where buyers and sellers of goods, services or resources are linked together to carry out an exchange

competitive market

market where competition is present

individual demand

indicates the various quantities of a good/service the consumer is willing and able to buy at different prices during a particular time period, ceteris paribus

law of demand

there is a negative relationship between the price of a good and its quantity demanded over a particular time period, ceteris paribus

market demand

the sum of all individual demands for a good/service

normal good

a good that has an increase in demand as consumer income increases

inferior good

a good that has a decrease in demand as consumer income increases

substitue goods

goods are substitute goods if they satisfy a similar need and can be used interchangeably

complementary goods

goods are complementary goods if they tend to be used together

individual supply

indicates the various quantities of a good/service that a firm is willing and able to produce and supply to the market for sale at different possible prices, during a particular period of time, ceteris paribus

law of supply

there is a positive relationship between the quantity of good/services supplied over a particular period of time and its price, ceteris paribus

market supply

the sum of all the individual forms’ supplies for a good/service

competitive supply

refers to production of one or the other by a firm; the goods compete for the use of the same resources, and producing one means producing less of the other. one good would overtake the other if its more profitable to supply to markets for sale

joint supply

refers to production of goods that are derived from a single product, so that it is not possible to produce more of one without producing more of the other

subsidy

a payment made to a firm by the, an antithesis of tax (may be given in order to increase incomes of producers or to encourage an increase in the production of the good/service being produced)

shortage

the demand for a good/service exceeds its supply. this often happens when the price is below market equilibrium

surplus

the supply of a good/service exceeds its demand. this often happens when the price is above market equilibrium

equilibrium

the state of balance between different forces, such that there is no tendency to change

market equilibrium

the quantity demanded for a product equals the quantity of the product supplied to the market for sale, and no tendency for price or quantity to change

equilibrium price

the price at which market equilibrium is reached

equilibrium quantity

the quantity of a product at which market equilibrium is reached

competitive market equilibrium

quantity demanded of a product equals its quantity supplied, and there is no tendency for price to change

market disequilibrium

there is an excess demand or shortage, or excess supply or surplus, and the forces of demand and supply to cause the price to change until the market reaches equilibrium

consumer surplus

the highest price consumers are willing to pay (given by the demand curve) for a good minus the price actually paid (determined at market equilibrium by both demand and supply)

producer surplus

the price received by firms selling their goods/services minus the lowest price that they are willing to accept to produce the good

social/community surplus

the sum of consumer and producer surplus

welfare

refers to the amount of consumer and producer surplus

scarcity

the central concept in economics, scarcity refers to the limited availability of economic resources relative to society’s unlimited demand for goods and services. This, economics is the study of how to make the best possible use of scarce and limited resources to satisfy unlimited human needs and wants