Supply and Demand: AP Macroeconomics

competitive market

a market in which there are many buyers and sellers of the same good or service, none of whom can influence the price at which the good or service is sold.

supply and demand model

a model of how a competitive market works

demand schedule

the actual amount of a good or service consumers are willing and able to buy at specific price.

dem sch

quantity demanded

the actual amount of a good or service consumers are willing and able to buy at some specific price.

demand curve

graphical representation of the demand schedule. It shows the relationship between quantity demanded and price.

law of demand

the higher price for a good or service, all other things being equal, leads people to demand smaller quantity of that good or service.

change in demand

a shift of the demand curve, which changes the quantity demanded at any given price.

movement along the demand curve

change in the quantity demanded of a good that is the result of a change in that good's price.

substitues

if a rise in the price of one of the goods lead go an increase in the demand for the other good.

complements

if a rise in the price of one goods leads to a decrease in the demand for the other good.

normal good

when s rise in income increases the demand for a good, it's a _____

inferior good

when the rise in income decreases, it's a _____

individual demand curve

illustrates the relationship between quantity demanded and price for an individual consumer.

quantity supplied

actual amount of a good or service producers are willing to sell at some specific price.

supply schedule

shows how much of a good or service producers will supply at different prices.

supply curve

shows the relationship between quantity supplied and price.

law of supply

the price of a good or service increases, all other factors being equal, the quantity of goods or services offered by suppliers increases.

change in supply

a shift of the supply curve, which changes the quantity supplied at any given price.

movement along the supply curve

change in the quantity supplied of a good that is the result of a change in that good's price.

input

anything used to produce a good or service.

individual supply curve

illustrates the relationship between quantity supplied and price for an individual producer.

equilibrium

market supply and demand balance each other and, as a result, prices become stable. No individual would be better off doing something different.

equilibrium price

price that matches the quantity supplied and the quantity demanded.

market-clearing price

equilibrium price.

equilibrium quantity

the price where the quantity of the good bought and sold.

surplus

when the quantity supplied exceeds the quantity demanded. Occurs when the price is above its equilibrium level.

shortage

when the quantity demanded exceeds the quantity supplied. Occurs when the price is below its equilibrium level.

price control

legal restrictions on how high or low a market price may go.

price ceiling

form of price control. A maximum price a sellers are allowed to charge for a good or service.

price floor

form of price control. A minimum price buyers are required to pay for a good or service.

inefficient allocation to consumers

people who want the good badly and are willing to pay a high price don't usually get it, and those who care relatively little about the good and are only willing to pay relatively low price do get it.

wasted resources

people expend money, effort, and time to cope with the shortages caused by price ceiling.

inefficiently low quality

sellers offer low quality goods at a low price even though buyers would prefer a higher quality at a higher price.

black market

market in which goods or service are bought and sold illegally -- either because it s illegal to sell them at all or because the price charged are legally prohibited by a price ceiling.

minimum wage

legal floor on the wage rate, which is the market price of labor.

inefficient allocation of sales among sellers

those who would be willing to sell the good at the lowest price are not always those who manage to sell it.

inefficiently high quality

sellers offer high-quality goods at a high price, even though buyers would prefer a lower quality at a lower price.