AP Micro 2.6-2.9

Market supply

The amount of a good or service available to consumers.

Market equilibrium

The point in a perfectly competitive market in which supply is equal to demand.

Equilibrium Price

The price point at which quantity supplied and quantity demanded intersect.

Equilibrium Quantity

The quantity bought and sold at the equilibrium price.

Perfect Competition

A theoretical market structure in which competition is at its greatest possible level.

Inventory

stock

shortage

undersupply of products in a market.

Surplus

oversupply of goods

Market Surplus

Occurs when quantity supplied is greater than quantity demanded, creating a glut of goods on the market.

Efficient Market

impossible to improve the economic situation of one party without imposing a cost on another.

Inefficient Market

possible to benefit one party without imposing a cost on another.

Consumer Surplus

difference between the price consumers pay and the price they are willing to pay.

Producer Surplus

the difference between the price for which the producer is willing to sell the product and the market equilibrium price.

Total economic surplus

add together consumer surplus and producer surplus

Market Disequilibrium

the quantity supplied of a good exceeded the quantity demanded at the current market price.

Equilibrium Price

the price at which demand and supply are in sync.

Sticky Prices

a situation in which prices adjust slowly when the supply and demand curve shifts.

Economic Recession

occurs when a country experiences a decline in economic activity

economic depression

prolonged recession

Price floor

a minimum price for a good or service established by the government

minimum wage

lowest amount of money an employer can pay a worker.

price ceiling

a maximum price for a good or service set by the government.

Externalities

costs or benefits that arise from the production or consumption of a good that falls on neither the producer nor the consumer.

Subsides

assistance that decreases costs or increasing benefits.

Allocative efficiency

the level of production at which the price of a product equals the marginal cost of production.

Deadweight loss

a decrease in total surplus that results from an inefficient level of production.

Quotas

restrictions that limit the number of goods a country can import or export during a specific time.

Absolute quota

simply set a limit on the number of products

Tariff-rate quota

allows a country to import a certain number of goods at a reduced tariff rate.

voluntary quota

limit the amount of exports for a particular type of good.