CHAPTER 3 BOOK

Demand

The amount of some good or service consumers are willing and able to purchase at each price.

Quantity Demanded

The total number of units that consumers would purchase at a specific price.

Law of Demand

A rule stating that as the price of a good or service rises, the quantity demanded decreases and vice versa, assuming all other factors remain constant.

Supply

The amount of some good or service a producer is willing to supply at each price.

Quantity Supplied

The total number of units that producers are willing to sell at a specific price.

Law of Supply

A rule stating that as the price of a good or service rises, the quantity supplied increases and vice versa, assuming all other factors remain constant.

Demand Curve

A graphic representation showing the relationship between price and quantity demanded.

Supply Curve

A graphic representation showing the relationship between price and quantity supplied.

Equilibrium

The situation where quantity demanded equals quantity supplied.

Equilibrium Price

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

Equilibrium Quantity

The quantity at which the quantity demanded and quantity supplied are equal.

Price Ceiling

A legal maximum price that can be charged for a good or service.

Price Floor

A legal minimum price that can be charged for a good or service.

Excess Supply

When the quantity supplied exceeds the quantity demanded at a given price.

Excess Demand

When the quantity demanded exceeds the quantity supplied at a given price.

Inferior Good

A good for which demand increases when consumer incomes decrease.

Normal Good

A good for which demand increases when consumer incomes increase.

Consumer Surplus

The difference between what consumers are willing to pay and what they actually pay.

Producer Surplus

The difference between what producers are willing to sell a good for and the price they actually receive.

Social Surplus

The sum of consumer surplus and producer surplus.

Deadweight Loss

The loss in social surplus that occurs when the market is not in equilibrium.

Ceteris Paribus

Latin for 'other things being equal'; an assumption that other relevant factors remain unchanged while a specific factor is analyzed.

Shifts in Demand

Changes in quantity demanded at every price due to factors other than price, such as income or preferences.

Shifts in Supply

Changes in quantity supplied at every price due to factors other than price, such as production costs or technology.