Micro economics

Shortage

________- a situation in which quantity demanded is greater than quantity supplied.

Surplus

________- a situation in which quantity supplied is greater than quantity demanded.

Supply schedule

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

supply demand model

The ________ is a tool that is used to understand the factors that influence the price and quantity of a good and why those prices and quantities change over time.

Law of supply

________ and demand- the claim that the price of any good adjusts to bring the quantity supplied and the quantity demanded for that good into balance.

A→B price decrease

________ leads to increase in quantity demanded.

B→ a price increase

________ leads to decreases in quantity demanded.

Supply

the quantity of a good and/or service that producers are willing and able to offer for sale at each possible price during a certain time period

Demand

the quantity of a good or service that buyers are willing to and able to buy at all possible prices during a certain time period

Law of demand

as the price of a good increases, the quantity demand of that good decreases

Normal good

 demand increases when income increases

Inferior good

 demand decreases when income increases

Substitute

two goods are substitutes, a decrease in the price of one leads to a decrease in demand for another

complements

two goods are complements a decrease in the price of one good leads to an increase in the demand for the other

Law of demand 

as the price of a increases the quantity demanded of the that good decreases

The Demand Curve

The Relationship between Price and Quantity Demanded

Law of demand

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

Demand schedule

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

Demand curve

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

Market demand

the sum of all individual demands for a particular good or service

Increase in demand

any change that increases the quantity demanded at every price and shifts the demand curve to the right

Decrease in demand

any change that reduces the quantity demanded at every price and shifts the demand curve to the left

The Supply Curve

The Relationship between Price and Quantity Supplied

Quantity supplied

the amount of a good that sellers are willing and able to sell

Law of supply

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

Supply schedule

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

Supply curve

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

Market supply

the sum of the supplies of all sellers

Equilibrium

a situation in which the market price has reached the level at which quantity supplied equals quantity demanded

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

a situation in which quantity supplied is greater than quantity demanded

Shortage

a situation in which quantity demanded is greater than quantity supplied

perfect complements that must be consumed in fixed proportions

If the sign of XED (cross point equilibrium) is negative ( -\infty−∞minus, infinity) and the elasticity of the goods are perfectly elastic

complementary goods

If the sign of XED (cross point equilibrium) is negative ( -\infty−∞minus, infinity) and the elasticity of the goods are elastic

substitutable goods

If the sign of XED (cross point equilibrium) is positive

Unrelated goods

If the result of XED(cross point equilibrium) is 0