The Market Forces of Supply and Demand

This set of flashcards covers essential vocabulary related to the concepts of supply and demand as introduced in Mankiw's Principles of Microeconomics.

Demand

The quantity of a good that buyers are willing and able to purchase.

Supply

The amount of a good that sellers are willing and able to sell.

Law of Demand

As the price of a good rises, the quantity demanded falls, and vice versa.

Law of Supply

As the price of a good rises, the quantity supplied rises, and vice versa.

Market

A group of buyers and sellers of a particular good or service.

Competitive Market

A market with many buyers and sellers, each having a negligible impact on market price.

Perfectly Competitive Market

A market where goods are homogenous and price takers exist.

Quantity Demanded

The amount of a good that buyers are willing to purchase at a given price.

Demand Schedule

A table showing the relationship between the price of a good and the quantity demanded.

Demand Curve

A graph plotting the relationship between the price of a good and the quantity demanded.

Market Demand

The sum of all individual demands for a good or service.

Shifts in Demand Curve

Changes in demand caused by non-price determinants such as income, preferences, and number of buyers.

Normal Good

A good for which demand increases as consumer income rises.

Inferior Good

A good for which demand decreases as consumer income rises.

Substitutes

Goods that can replace each other; an increase in the price of one increases the demand for the other.

Complements

Goods that are often consumed together; an increase in the price of one decreases the demand for the other.

Expectations

Anticipations about the future that can influence current demand and supply.

Market Supply

The sum of all individual supplies of a good or service.

Supply Schedule

A table showing the relationship between the price of a good and the quantity supplied.

Supply Curve

A graph showing the relationship between the price of a good and the quantity supplied.

Input Prices

The costs to produce a good that can shift the supply curve.

Technology

Advancements that can lower production costs and shift the supply curve to the right.

Equilibrium Price

The price at which the quantity supplied equals the quantity demanded.

Surplus

A situation where quantity supplied exceeds quantity demanded at a specific price.

Shortage

A situation where quantity demanded exceeds quantity supplied at a specific price.

Signals of Supply and Demand

Prices act as signals to both consumers and producers in a market.

Price Takers

Individuals or entities in a perfectly competitive market that cannot influence the market price.

Quantity Supplied

The amount of a good that sellers are willing to sell at a particular price.

Non-Price Determinants

Factors other than the price that can influence demand and supply.

Market Forces

The economic factors affecting the supply and demand of goods.

Movement Along the Demand Curve

A change in quantity demanded due to a change in price.

Change in Demand

A shift in the entire demand curve due to non-price factors.

Market for Muffins

An example used to illustrate principles of supply and demand in the lecture.