Economics: Demand, Supply, Market Structures, and Government Roles

Law of Demand

An economic law stating that as the price of a good or service increases, the quantity demanded decreases, and vice versa.

Supply Curve

A curve that represents the relationship between the price of a good and the quantity that producers are willing to sell. (slope upwards)

Demand Curve

A curve that shows the relationship between the price of a good and the quantity that consumers are willing to buy. (slope downwards)

Equilibrium

The point at which the quantity of a product demanded by consumers in a market equals the quantity supplied by producers.

Market Equilibrium

Is reached when the prices of good or service adjust to bring quantity demanded and quantity supply into balance.

Elasticity

The degree to which a quantity demanded or a quantity supplied changes in response to a change in price.

Elastic Demand

A measure of the sensitivity of consumers to a change in price.

Inelastic Demand

Not sensitive to a price change.

Shortage

Occurs when there are too many consumers chasing too few goods.

Surplus

Quantity supplied at a specific price exceeds the quantity demanded.

Price

Conveys information: consumers look at a price and think of the opportunity cost.

Perfect Competition

A market structure with a large number of firms producing essentially the same product.

Monopoly

Market or an industry consisting of a single producer of a product that has no close substitutes.

Resource Monopoly

A single producer owns or controls a key natural resource.

Government Created Monopoly

The government grants a single firm or individual the exclusive right to provide a good or service.

Natural Monopoly

A single firm supplies a good or service more efficiently and at a lower cost than two or more competing firms can.

Compound Interest

Interest paid not only on the original amount deposited in an amount but also on all interest earned by those savings.

Rate of Return

The ratio of the money gained or lost by an investment relative to the amount invested.

Budget

A plan for spending and saving.

Sole Proprietorship

A business owned and run by one individual.

Partnership

A business owned by two or more people.

Corporation

A legal entity that is separate and distinct from its owners.

Minimum Wage Laws

Laws that set the lowest legal wage that can be paid to workers.

Opportunity Cost

The potential benefit or gain that is given up when choosing one option over others.

Economic Growth

Saving allows banks to meet in the economy.

Entrepreneur

Someone who takes risks and responsibilities in business with the intent of making profit.

Taxes

Mandatory financial charges imposed by a government on its citizens.

Sales Tax

A tax on the purchase of goods and services.

Property Income Tax

Taxes levied on real property, land, and buildings.