Demand, Supply and Market Equilibrium

These flashcards cover key terms and definitions related to demand, supply, market equilibrium, and government price controls, summarizing essential concepts for exam preparation.

Demand Schedule

A table showing various amounts of a product consumers are willing and able to purchase at different prices.

Demand Curve

A graph that plots the quantity demanded at various prices, illustrating the relationship between price and quantity demanded.

Law of Demand

As price decreases, quantity demanded increases, and as price increases, quantity demanded decreases, reflecting an inverse relationship.

Determinants of Demand

Factors that cause the demand curve to shift, including changes in consumer tastes, number of buyers, income, prices of related goods, and consumer expectations.

Change in Quantity Demanded

Movement along the demand curve due to changes in the price of a good, rather than a shift of the curve itself.

Supply Schedule

A table representing the quantities of a product producers are willing to sell at different prices.

Supply Curve

A graph that plots the quantity supplied at various prices, usually sloping upwards.

Law of Supply

As prices rise, the quantity supplied increases; as prices fall, the quantity supplied decreases.

Market Equilibrium

The point where the quantity demanded equals the quantity supplied, determining the market price and quantity.

Price Ceiling

A legal maximum price that can be charged for a product to make it affordable; can create shortages.

Price Floor

A legal minimum price set above equilibrium to ensure producers receive adequate income; can create surpluses.

Allocative Efficiency

The allocation of resources to produce the goods and services most valued by society, ensuring optimal production.

Productive Efficiency

The situation where goods are produced at the lowest cost, maximizing resource allocation.

Changes in Demand

Increases or decreases in demand shift the demand curve to the right or left, affecting equilibrium prices and quantities.

Changes in Supply

Increases or decreases in supply shift the supply curve to the right or left, impacting equilibrium prices and quantities.

Equilibrium Price

The price at which the market clears, with no surplus or shortage; intersection point of supply and demand curves.

Surplus

A situation where quantity supplied exceeds quantity demanded, often occurring when the price is above equilibrium.

Shortage

A situation where quantity demanded exceeds quantity supplied, often occurring when the price is below equilibrium.