Chapter 4: The Market Forces of Supply and Demand

These flashcards cover key vocabulary and concepts from Chapter 4 of 'Principles of Microeconomics,' focusing on the market forces of supply and demand.

Market

A group of buyers and sellers of a particular good or service.

Demand

The quantity of a good that buyers are willing and able to purchase at various prices.

Law of Demand

The principle that states the quantity demanded of a good falls when its price rises, and vice versa.

Demand Curve

A graph that shows the relationship between the price of a good and the quantity demanded.

Supply

The quantity of a good that sellers are willing and able to sell at various prices.

Law of Supply

The principle that states the quantity supplied of a good rises when the price rises, and falls when the price falls.

Supply Curve

A graph that shows the relationship between the price of a good and the quantity supplied.

Equilibrium Price

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

Surplus

A situation in which the quantity supplied is greater than the quantity demanded.

Shortage

A situation in which the quantity demanded is greater than the quantity supplied.

Market Demand

The sum of all individual demands for a good or service.

Non-Price Determinants of Demand

Factors that can cause the demand curve to shift, such as income, preferences, and the prices of related goods.

Input Prices

The prices of the resources used to produce goods or services, which can affect the supply curve.

Substitutes

Goods that can be used in place of one another; an increase in the price of one leads to an increase in the demand for the other.

Complements

Goods that are used together; an increase in the price of one leads to a decrease in the demand for the other.