Chapter 3 Demand_Supply_Market Equilibrium (2)

Market

An interaction between buyers and sellers where a large number of buyers and sellers act independently.

Demand

A schedule or curve showing the various amounts of a product that consumers are willing and able to purchase at different prices over specified periods.

Law of Demand

As price falls, the quantity demanded rises; as price rises, the quantity demanded falls, assuming other factors remain constant.

Demand Curve

A graphical representation of the relationship between the price of a product and the quantity demanded.

Market Demand

The total quantity demanded by all consumers in the market at various prices.

Determinants of Demand

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

Supply

A schedule or curve showing the various amounts of a product that producers are willing and able to sell at different prices over a specified period.

Law of Supply

As the price rises, the quantity supplied rises; as the price falls, the quantity supplied falls, assuming other factors remain constant.

Supply Curve

A graphical representation of the relationship between the price of a product and the quantity supplied.

Determinants of Supply

Factors that cause shifts in the supply curve, including changes in resource prices, technology, number of sellers, taxes and subsidies, and producer expectations.

Market Equilibrium

The point where the demand curve and supply curve intersect, determining the equilibrium price and quantity.

Equilibrium Price

The price at which the quantity demanded equals the quantity supplied.

Shortage

A situation where the quantity demanded exceeds the quantity supplied at a given price.

Surplus

A situation where the quantity supplied exceeds the quantity demanded at a given price.

Price Ceiling

A maximum price set by the government that can be charged for a good, typically set below the equilibrium price to make necessities affordable.

Price Floor

A minimum price set by the government that must be paid for a good, typically set above the market price, leading to chronic surpluses.

Binding Price Ceiling

A price ceiling that is set below the equilibrium price, resulting in a shortage.