Unit 1: Demand, Supply and Elasticity

Vocabulary flashcards covering key terms and concepts related to demand, supply, elasticity, and market equilibrium.

Demand

The amount of commodity which an individual buyer is willing and able to buy at a given price during a given period of time.

Demand Schedule

A tabular statement that states the different quantities of a commodity that would be demanded at different prices.

Individual Demand Schedule

A table that shows the quantity of a commodity demanded by an individual household at various alternative prices.

Market Demand Schedule

A table that shows the different quantity of a commodity demanded by different households or consumers in a market.

Demand Curve

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

Law of Demand

States that more of a commodity is demanded when its price falls and less when its price rises, holding other factors constant.

Assumptions of the Law of Demand

Includes no change in prices of related goods, constant consumer preferences, stable income levels and population size.

Giffen Goods

A type of good for which an increase in price leads to an increase in quantity demanded, violating the law of demand.

Normal Goods

Goods whose demand increases as consumer income rises.

Inferior Goods

Goods whose demand decreases as consumer income rises.

Substitutes

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

Complements

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

Elasticity of Demand

A measure of the responsiveness of quantity demanded to a change in price.

Price Elasticity of Demand (PED)

Measures how much quantity demanded changes with a change in the price of a good.

Income Elasticity of Demand (IED)

Measures how quantity demanded changes with a change in consumer income.

Cross Elasticity of Demand (CED)

Measures how the quantity demanded of one good changes in response to a change in the price of another good.

Supply

The quantities of a commodity that producers are willing and able to sell at various prices.

Supply Curve

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

Law of Supply

As the price of a commodity rises, the quantity supplied also increases, holding other factors constant.

Market Equilibrium

The condition where the quantity demanded equals the quantity supplied.

Equilibrium Price

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

Excess Demand

Occurs when consumers want more of a good than producers are willing to supply.

Excess Supply

Occurs when producers supply more of a good than consumers are willing to buy.