Economics Unit 4: Supply and Demand Vocabs

Demand

Demand

Consumer willingness and ability to buy products

Supply

The amount of goods available

voluntary exchange

the act of buyers and sellers freely and willingly engaging in market transactions

law of demand

consumers buy more of a good when its price decreases and less when its price increases

real income

what an income will actually purchase after allowing for the effects of inflation

substitution effect

when consumers react to an increase in a good’s price by consuming less of that good and more of a substitute good

demand schedule

a table that lists the quantity of a good a person will buy at each different price

demand curve

downward-sloping line that graphically shows the quantities demanded at each possible price

complementary goods

goods that are usually purchased or used together

elasticity

a measure of how much one economic variable responds to changes in another economic variable

elastic demand

a situation in which consumer demand is sensitive to changes in price

supply schedule

a chart that lists how much a good a supplier will offer at different prices

supply curve

a curve that shows the relationship between the price of a product and the quantity of the product supplied

technology

how people modify the world around them to meet their needs or to solve practical problems

law of diminishing returns

if one aspect of production is increased while all the others remain at the same level, the overall return will decrease after a certain point

Market-Clearing Price/Equilibrium

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

demand shifters

a factor other than price that can cause a change in demand for a good or service; examples include changes in consumer incomes or tastes

T.R.I.B.E

(Demand Shifters) taste, related goods, # of buyers, expectations about future

supply shifters

a factor other than price that can cause a change in the supply of a good or service

I.R.E.N.T

(Supply Shifters) input prices, related good prices, expectations about future, number of suppliers, technology