econ lecture 3: supply, demand, and market equilibrium

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14 Terms

1
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qd(p)

formula for the quantity demanded, where qd is the function of price: p

2
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prices and quantities are inversely or negatively related

law of demand

3
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the demand curve is ___

downsloping

4
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qs(p)

formula for the quantity supplied, where qs is the function of price: p

5
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law of supply

price and quantity are directly or positively related

6
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supply curve is ___

upsloping

7
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period of time where capital resources cannot be changed or is fixed

the short run

8
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quality, availability, and taste, income, and relative price of substitute and complementary goods

modifying criteria that affect consumer preferences and purchasing decisions.

9
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agreement between buyers and sellers

qd(p) = qs(p) > equilibrium point on graph

market equilibrium

10
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markets fail without ___

flexibility

11
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marginal costs and benefits

the economic principle that evaluates the additional costs and benefits of a decision, helping consumers and firms make optimal choices

MC = S, MB = D

12
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cleared of shortages and surpluses

market clearing

13
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underestimation of demand, qd > qs

price needs to rise to clear market

shortage

14
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overestimation of demand qd < qs

price needs to fall to clear market

surplus