ECON 2110 Principles of Micro

Flashcards covering key concepts of microeconomic principles, including supply and demand, elasticity, market equilibrium, and consumer/producer surplus.

Supply Curve

A graph showing the relationship between price and quantity supplied.

Demand Curve

A graph depicting the quantities of a good that consumers are willing to purchase at various prices.

Equilibrium Price

The price at which the quantity of a good demanded by consumers equals the quantity supplied by producers.

Law of Demand

A principle stating that as the price of a good increases, the quantity demanded decreases, and vice versa.

Surplus

A situation in which the quantity supplied of a good exceeds the quantity demanded at a given price.

Shortage

A situation where the quantity demanded for a good exceeds the quantity supplied at a given price.

Self-Correcting Mechanisms

Market processes that automatically move the market back to equilibrium after a disturbance.

Market Cleansing Price

The price at which the quantity supplied equals the quantity demanded, eliminating any surplus or shortage.

Elasticity of Demand

A measure of how responsive the quantity demanded of a good is to a change in its price.

Producer Surplus

The difference between what producers are willing to accept for a good versus what they actually receive.

Consumer Surplus

The difference between what consumers are willing to pay for a good and the price they actually pay.

Inferior Goods

Goods for which demand increases when consumer incomes decrease.

Substitutes

Goods that can be used interchangeably, so that an increase in the price of one will increase the demand for the other.

Complements

Goods that are consumed together, so that an increase in the price of one will decrease the demand for the other.

Shifters of Supply and Demand

Factors that cause the supply or demand curve to shift, impacting the market equilibrium.

Total Surplus

The sum of consumer surplus and producer surplus in a market, representing total welfare.

Marginal Cost

The additional cost incurred from producing one more unit of a good.

Gains from Trade

The increase in total welfare that results from voluntary exchanges in the market.

Equilibrium Quantity

The quantity of goods bought and sold at the equilibrium price.

Normal Goods

Goods for which demand increases as consumer incomes increase.

Market Equilibrium

The state in which market supply and demand balance each other, resulting in stable prices.

A supply curve shows what?

The relationship between price and quantity supplied.

How many units of a good will be supplied at various prices.

The cost of producing a good.

The demand curve represents _____, while the supply curve represents

____

Benefits, costs

The “law of demand” does which of the following?

It says that people buy less of a good when price rises.