________: graph /schedule showing the quantity of a good that sellers wish to sell at each price.
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Improvement
________ in technology that reduces the cost of producing the good /service.
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Complements
________: 2 goods are ________ in consumption if an increase in the price of one causes a leftward shift in the demand curve for the other (or if a decrease causes a rightward shift)
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Substitutes
________: 2 goods are ________ in consumption if an increase in the price of one causes rightward shift in the demand curve for the other (or if a decrease causes a leftward shift)
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Income effect
________: change in the quantity demanded of a good that results because a change in the price of a good changes the buyer's purchasing power.
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reservation price
Seller's ________: the smallest dollar amount for which a seller would be willing to sell an additional unit, generally equal to marginal cost.
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Equilibrium
________: balanced /unchanging situation in which all forces at work within a system are canceled by others.
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Total surplus
________: difference between the buyer's reservation price and the seller's reservation price.
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Excess supply
________: amount by which quantity supplied exceeds quantity demanded when the price of a good exceeds the equilibrium price.
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Substitution effect
________: change in the quantity demanded of a good that results because buyers switch to or from substitutes when the price of the good changes.
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Efficiency
________= economic efficiency: condition that occurs when all goods and services are produced and consumed at their respective socially optimal levels.
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Demand curve
________: schedule /graph showing the quantity of a good that buyers wish to buy at each price.
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Market
market for any good consists of all buyers and sellers of that good
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Demand curve
schedule/graph showing the quantity of a good that buyers wish to buy at each price
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Substitution effect
change in the quantity demanded of a good that results because buyers switch to or from substitutes when the price of the good changes
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Income effect
change in the quantity demanded of a good that results because a change in the price of a good changes the buyer's purchasing power
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Buyer's reservation price
the largest dollar amount the buyer would be willing to pay for good
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Supply curve
graph/schedule showing the quantity of a good that sellers wish to sell at each price
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Seller's reservation price
the smallest dollar amount for which a seller would be willing to sell an additional unit, generally equal to marginal cost
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Equilibrium
balanced/unchanging situation in which all forces at work within a system are canceled by others
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Equilibrium price and equilibrium quantity
price and quantity at the intersection of the supply and demand curves for the good
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Excess supply
amount by which quantity supplied exceeds quantity demanded when the price of a good exceeds the equilibrium price
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Excess demand
amount by which quantity demanded exceeds quantity supplied when the price of a good lies below the equilibrium price
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Change in the quantity demanded
movement along the demand curve that occurs in response to a change in price
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Change in demand
shift of the entire demand curve
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Change in the quantity supplied
movement along the supply curve that occurs in response to change in price
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Change in supply
shift of the entire supply curve
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Complements
2 goods are complements in consumption if an increase in the price of one causes a leftward shift in the demand curve for the other (or if a decrease causes a rightward shift)
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Substitutes
2 goods are substitutes in consumption if an increase in the price of one causes rightward shift in the demand curve for the other (or if a decrease causes a leftward shift)
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Normal good
good whose demand curve shifts rightward when the incomes of buyers increase and leftward when the Incomes of buyers decrease
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Inferior good
good whose demand curve shifts leftward when the incomes of buyers increase and rightward when the incomes of buyers decrease
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Buyer's surplus
difference between the buyer's reservation price and the price he/she actually pays
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Seller's surplus
difference between the price received by the seller and his/her reservation price
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Total surplus
difference between the buyer's reservation price and the seller's reservation price
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Cash on the table
economic metaphor for unexploited gains from exchange
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Socially optimal quantity
quantity of a good that results in the maximum possible economic surplus from producing and consuming the good
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Efficiency = economic efficiency
condition that occurs when all goods and services are produced and consumed at their respective socially optimal levels