Studied by 1 personSupply curve
________: graph /schedule showing the quantity of a good that sellers wish to sell at each price.
Improvement
________ in technology that reduces the cost of producing the good /service.
Complements
________: 2 goods are ________ in consumption if an increase in the price of one causes a leftward shift in the demand curve for the other (or if a decrease causes a rightward shift)
Substitutes
________: 2 goods are ________ in consumption if an increase in the price of one causes rightward shift in the demand curve for the other (or if a decrease causes a leftward shift)
Income effect
________: change in the quantity demanded of a good that results because a change in the price of a good changes the buyer's purchasing power.
reservation price
Seller's ________: the smallest dollar amount for which a seller would be willing to sell an additional unit, generally equal to marginal cost.
Equilibrium
________: balanced /unchanging situation in which all forces at work within a system are canceled by others.
Total surplus
________: difference between the buyer's reservation price and the seller's reservation price.
Excess supply
________: amount by which quantity supplied exceeds quantity demanded when the price of a good exceeds the equilibrium price.
Substitution effect
________: change in the quantity demanded of a good that results because buyers switch to or from substitutes when the price of the good changes.
Efficiency
________= economic efficiency: condition that occurs when all goods and services are produced and consumed at their respective socially optimal levels.
Demand curve
________: schedule /graph showing the quantity of a good that buyers wish to buy at each price.
Market
market for any good consists of all buyers and sellers of that good
Demand curve
schedule/graph showing the quantity of a good that buyers wish to buy at each price
Substitution effect
change in the quantity demanded of a good that results because buyers switch to or from substitutes when the price of the good changes
Income effect
change in the quantity demanded of a good that results because a change in the price of a good changes the buyer's purchasing power
Buyer's reservation price
the largest dollar amount the buyer would be willing to pay for good
Supply curve
graph/schedule showing the quantity of a good that sellers wish to sell at each price
Seller's reservation price
the smallest dollar amount for which a seller would be willing to sell an additional unit, generally equal to marginal cost
Equilibrium
balanced/unchanging situation in which all forces at work within a system are canceled by others
Equilibrium price and equilibrium quantity
price and quantity at the intersection of the supply and demand curves for the good
Excess supply
amount by which quantity supplied exceeds quantity demanded when the price of a good exceeds the equilibrium price
Excess demand
amount by which quantity demanded exceeds quantity supplied when the price of a good lies below the equilibrium price
Change in the quantity demanded
movement along the demand curve that occurs in response to a change in price
Change in demand
shift of the entire demand curve
Change in the quantity supplied
movement along the supply curve that occurs in response to change in price
Change in supply
shift of the entire supply curve
Complements
2 goods are complements in consumption if an increase in the price of one causes a leftward shift in the demand curve for the other (or if a decrease causes a rightward shift)
Substitutes
2 goods are substitutes in consumption if an increase in the price of one causes rightward shift in the demand curve for the other (or if a decrease causes a leftward shift)
Normal good
good whose demand curve shifts rightward when the incomes of buyers increase and leftward when the Incomes of buyers decrease
Inferior good
good whose demand curve shifts leftward when the incomes of buyers increase and rightward when the incomes of buyers decrease
Buyer's surplus
difference between the buyer's reservation price and the price he/she actually pays
Seller's surplus
difference between the price received by the seller and his/her reservation price
Total surplus
difference between the buyer's reservation price and the seller's reservation price
Cash on the table
economic metaphor for unexploited gains from exchange
Socially optimal quantity
quantity of a good that results in the maximum possible economic surplus from producing and consuming the good
Efficiency = economic efficiency
condition that occurs when all goods and services are produced and consumed at their respective socially optimal levels
Market
Market for any good consists of all buyers and sellers of that good
Demand curve
Schedule/graph showing the quantity of a good that buyers wish to buy at each price
Substitution effect
Change in the quantity demanded of a good that results because buyers switch to or from substitutes when the price of the good changes
Income effect
Change in the quantity demanded of a good that results because change in the price of a good changes the buyer's purchasing power
Buyer's reservation price
The largest dollar amount the buyer would be willing to pay for good
Supply curve
Graph/schedule showing the quantity of a good that sellers wish to sell at each price
Seller's reservation price
The smallest dollar amount for which a seller would be willing to sell an additional unit, generally equal to marginal cost
Equilibrium
Balanced/unchanging situation in which all forces at work within a system are canceled by others
Equilibrium price and equilibrium quantity
Price and quantity at the intersection of the supply and demand curves for the good
Market equilibrium
Market equilibrium occurs in a market when all buyers and sellers are satisfied with their respective quantities at the market price
Excess supply
Amount by which quantity supplied exceeds quantity demanded when the price of a good a exceeds the equilibrium price
Excess demand
Amount by which quantity demanded exceeds quantity supplied when the price of a good lies below the equilibrium price
Change in the quantity demanded
Movement along the demand curve that occurs in response to a change in price
Change in demand
Shift of the entire demand curve
Change in the quantity supplied
Movement along the supply curve that occurs in response to change in price
Change in supply
Shift of the entire supply curve
Complements
2 goods are complements in consumption if an increase in the price of one causes a leftward shift in the demand curve for the other (or if a decrease causes a rightward shift)
Substitutes
2 goods are substitutes in consumption if an increase in the price of one causes rightward shift in the demand curve for the other (or if a decrease causes a leftward shift)
Normal good
Good whose demand curve shifts rightward when the incomes of buyers increase and leftward when the Incomes of buyers decrease
Inferior good
Good whose demand curve shifts leftward when the incomes of buyers increase and rightward when the incomes of buyers decrease
Buyer's surplus
Difference between the buyer's reservation price and the price he/she actually pays
Seller's surplus
Difference between the price received by the seller and his/her reservation price
Total surplus
Difference between the buyer's reservation price and the seller's reservation price
Cash on the table
Economic metaphor for unexploited gains from exchange
Socially optimal quantity
Quantity of a good that results in the maximum possible economic surplus from producing and consuming the good
Efficiency = economic efficiency
Condition that occurs when all goods and services are produced and consumed at their respective socially optimal levels
Note 
Flashcard (44)