Chapter 4: The Market Forces of Supply and Demand

Inferior

If the demand for a good rises when income falls, the good is called as ________ Good.

Substitutes

Two goods for which an increase in the price of one leads to an increase in the demand for the other.

Surplus

In instances where quantity supplied and quantity demanded are not equal (like in ________ and Shortages), prices will adjust until equilibrium is reached.

Shortage

A situation where the quantity demanded is greater than the quantity supplied.

Supply Schedule

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

Equilibrium

Occurs when the market price has reached a level at which quantity supplied equals quantity demanded.

Quantity Supplied

The amount of a good or service that sellers are willing and able to sell.

good shifts

Any change that raises the quantity demanded of a(n) ________ the demand curve to the right.

Quantity Demanded

The amount of a good that buyers are willing and able to purchase.

vertical axis

By convention, the price of the good is on the ________, while the quantity supplied of the good is on the horizontal axis.

Demand Curve

The ________ is downward- sloping.

Complements

Two goods for which an increase in the price of one leads to a decrease in the demand for the other.

Surplus

A situation where the quantity supplied is greater than the quantity demanded.

good shifts

Any change that raises the quantity supplied of a(n) ________ the supply curve to the right.

vertical axis

By convention, the price of the good is on the ________, while the quantity demanded of the good is on the horizontal axis.

Market

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

Competitive Market

A market in which there are many buyers and sellers, and each has an impact on the market price

Monopoly

In this market, there is only one seller. This singular seller sets the market price.

Law of Demand

The claim that, other things being equal, the quantity demanded of a good falls when the price of the good rises.

Law of Supply

The claim that, other things being equal, the quantity supplied of a good rises when the price of a good rises

Equilibrium Price

The price at the intersection where quantity supplied is equal to quantity demanded

Equilibrium Quantity

The quantity supplied and the quantity demanded at the equilibrium price

Law of Supply and Demand

States that the price of any good adjusts to bring the quantity supplied and quantity demanded for that good into balance.