Economics: Demand and Supply Concepts

Vocabulary flashcards generated from the lecture transcript covering demand and supply principles, graph movements versus shifts, and determinants of demand and supply.

Law of Demand

The economic principle stating that, all other things equal, buyers will purchase more of a good or service at low prices and less at high prices.

Demand Schedule

A chart or table displaying the specific quantities of a good demanded at various price levels.

Demand Curve

A graph illustrating the inverse relationship between price and quantity demanded, traditionally labeled with a capital $D$ in the bottom right-hand corner.

Income Effect

An explanation for the law of demand stating that as the price of a good decreases, a consumer's fixed budget stretches further, allowing them to purchase more units.

Substitution Effect

An explanation for the law of demand stating that as the price of a good increases, consumers switch away from it toward alternative substitute goods, and vice versa.

Law of Diminishing Marginal Utility

The principle that each additional unit of a good consumed provides less and less satisfaction, requiring price reductions to induce buyers to buy more.

Change in Quantity Demanded

A movement from one point to another along the same existing demand curve, caused exclusively by a change in the price of the product.

Change in Demand

A shift of the entire demand curve to the right (increase) or to the left (decrease), caused by a change in one of the five determinants of demand.

Consumer Tastes and Preferences

A determinant of demand where shifts occur due to changing consumer attitudes, published research, social media statements, or public perceptions about a product.

Normal Good

A product whose demand increases when national income increases, and whose demand decreases when national income decreases.

Inferior Good

A product whose demand decreases when national income increases, and whose demand increases when national income decreases (e.g., Goodwill clothes).

Substitute Goods

Two related products used in place of one another, exhibiting a direct relationship where a price increase for one good increases demand for the other.

Complementary Goods

Two related products that are used together, exhibiting an inverse relationship where a price increase for one good decreases demand for the other.

Consumer Expectations

A determinant of demand where anticipated future prices, fees, or economic changes lead buyers to alter their current purchasing behavior.

Law of Supply

The economic principle stating that, all other things equal, producers will supply more of a product at higher prices and less at lower prices.

Supply Curve

An upward-sloping graph illustrating the direct relationship between price and quantity supplied, labeled with a capital $S$ in the top right-hand corner.

Change in Quantity Supplied

A movement from point to point along a single supply curve, caused solely by a change in the product's price.

Change in Supply

A shift of the entire supply curve to the right (increase) or left (decrease), driven by a change in one of the six determinants of supply.

Resource Prices

A determinant of supply where changes in the costs of productive inputs (land, labor, capital, entrepreneurship) impact production costs and shift the supply curve.

Subsidies

Financial payments provided by the government to producers, which lower production costs and shift the supply curve to the right.

Substitute Production Goods

Alternative goods a manufacturer can produce with similar resources (e.g., soccer balls vs. baseballs), where increased profitability in one reduces supply of the other.

Producer Expectations

A determinant of supply where sellers' predictions of upcoming economic conditions (such as a recession) cause them to adjust current production levels.