Chapter 3 (macro)

Number of Consumers in the Market

More consumers in the market will likely lead to a larger demand for a good or service.

Impact of Fewer Consumers

Fewer consumers in the market will likely result in a smaller demand for a good or service.

Example of Increased Demand due to Population Growth

The sharp increase in the number of teenagers in the U.S. in the late 1990s led to increased demand for products marketed to teenagers.

Demand

A relationship between price and the quantity demanded.

Price

The amount of money required to obtain a good.

Quantity Demanded

The amount consumers are willing to buy at a given price in a specific timeframe.

Demand Schedule

A table showing price and quantity demanded for a good.

Demand Curve

A graph representing the relationship between price and quantity demanded.

Law of Demand

Quantity demanded decreases as price rises; thus, the demand curve slopes downward.

Shifts in Demand

Demand curves shift due to preferences, information, income levels, number of consumers, future price expectations, and prices of related goods.

Normal Goods

Goods for which demand rises as income increases.

Inferior Goods

Goods for which demand falls as income increases.

Supply

A relationship between price and quantity supplied.

Quantity Supplied

The amount sellers are willing to sell at a given price.

Supply Schedule

A table representing the supply curve.

Supply Curve

A graph showing the price vs. quantity supplied.

Law of Supply

Quantity supplied increases as price rises; thus, the supply curve slopes upward.

Market Equilibrium

A condition where price equals equilibrium price and traded quantity equals equilibrium quantity.

Shortage

Occurs when the quantity demanded exceeds the quantity supplied at a price below equilibrium.

Surplus

Occurs when quantity supplied exceeds quantity demanded at a price above equilibrium.