Supply, Demand, and Equilibrium

Horizontal sum

________- individual demand curves of all consumers in a market.

Government

________ can limit quantity by requiring licenses to produce certain products.

Competitive market

many buyers and sellers for the same good or service

Market equilibrium

includes equilibrium price and quantity

Demand Schedule

table that shows how much of a certain good consumers are willing to buy at different prices

Demand Curve

graphical representation of a demand schedule

Law of Demand

the higher price of a good or service leads to less quantity of that good or service, all other things being equal

Complements in consumption

two goods that are used together

The rise in the price of one good leads to a decrease in demand for the other good (example

Beef and Potatoes)

Individual Demand Curve

shows quantity demanded and price for a single customer

Market Demand Curve

combined quantity demanded of all consumers determined by the market price of a good

Horizontal sum

individual demand curves of all consumers in a market

Supply Schedule

table that shows how much of a good or service produced will affect prices

Examples of input prices for producing donuts

Ingredients, Oven, Labor, Utility, and Rent

Substitutes in production (Example

Coke and BodyArmor)

Complements in production (Example

Cow skin and beef)

Wasted Resources

a form of inefficiency where people expend money, effort, and time to cope with the shortcomings experienced by a price ceiling

Inefficiently low quality

sellers sell lower quality goods at a lower price

competitive market

a market in which there are many buyers and many sellers for the same good or service

demand curve

a graph of the relationship between the price of a good and the quantity demanded

demand schedule

a table that shows the relationship between the price of a good and the quantity demanded

quantity demanded

actual amount consumers are willing and able to buy at a certain price

demand

how much people want at every price point

law of demand

higher price of a good or service leads to less quantity of that good or service, all other things being equal

increase in demand

a rightward shift of the demand curve

decrease in demand

a leftward shift of the demand curve

TRIBE

acronym for properties that shift the demand curve

taste

how people feel about a product

related goods or services

includes substitutes and compliments in consumption

substitues in consumption

goods that can be used in place of another good to satisfy similar needs or desires; increase in price of this leads to an increase in demand for "THE" product

compliments in consumption

goods that tend to be consumed together; a rise in price of this product leads to a decrease in demand for "THE" product

income

includes normal and inferior goods

normal goods

goods that consumers demand more of when their incomes rise

inferior goods

a rise in income decreases the demand, mostly due to better, more expensive options

individual demand curve

illustrates the relationship between quantity demanded and price for an individual consumer

market demand curve

the demand curve that shows the quantities demanded by everyone who is interested in purchasing the product

horizontal sum

the individual demand curves of all consumers in that market

quantity supplied

amount producers are willing to produce and sell

supply

the amount of goods available

supply schedule

a table that shows the relationship between the price of a good and the quantity supplied

law of supply

the price and quantity supplied are directly related

increase in supply

a downward shift in supply curve

decrease in supply

an upward shift of the supply curve

IRENT

factors that shift the supply curve

input

any good or service that is used to produce another good or service

related goods or services

includes substitutes and compliments in production

substitutes in production

alternative products that producers COULD use their resources to make

compliments in production

goods that must be produced together

equilibrium

an economic condition where no individual would be better off with any alternative

equilibrium price

the price that balances quantity supplied and quantity demanded

equilibrium quantity

the quantity supplied and the quantity demanded at the equilibrium price

surplus

excess supply

shortage

excess demand

increase in demand

equilibrium price and quantity both rise

increase in supply

the equilibrium price decreases and the equilibrium quantity increases

decreases, increases

when supply _____ and demand _____, price rises and quantity is ambiguous

increases, decreases

when supply _____ and demand _____, price falls and quantity is ambiguous

increases, increases

when supply _____ and demand _____, quantity rises and price is ambiguous

decreases, decreases

when supply _____ and demand _____, quantity falls and price is ambiguous

consumer surplus

the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it

producer surplus

the amount a seller is paid for a good minus the seller's cost of providing it