Microecon Chapter 3 - Demand and Supply
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43 Terms
Competitive Market
has many buyers and sellers of the same good, none of whom can influence the market price
Supply and demand model
a model of how a competitive market behaves
Market equilibrium
equilibrium price and quantity
Demand curve
Shows the quantity demanded at various prices
Quantity Demanded
the quantity that buyers are willing and able to purchase at a particular price
Normal good
demand increases when income increases
Inferior good
demand decreases when income increases
Shortage
the quantity demanded exceeds the quantity supplied
Surplus
the quantity supplied exceeds the quantity demanded
Law of Demand
As price falls, all else constant, the quantity demanded increases
On a demand curve, change in price
leads to change in quantity demanded
Demand shifters
Changes in the prices of related goods or services
Changes in income
Changes in taste
Changes in expectations
Changes in the number of consumers
When the price of a substitute rises, demand for the original good
increases
When the price of a complement good decreases, demand for the original good
increases
When income rises, demand for a normal good
increases
When income falls, demand for an inferior good
increases
When tastes change in favor of a good, demand for the good
increases
When the price is expected to rise in the future, demand for the good
increases today
When the numbers of buyers rises, market demand for the good
increases
When the price of a substitute falls, demand for the original good
decreases
When the price of a complement rises, demand for the original good
decreases
When income falls, demand for a normal good
decreases
When income rises, demand for an inferior good
decreases
When tastes change against a good, demand for the good
decreases
When the price is expected to fall in the future, demand for the good
decreases today
When the number of buyers falls, market demand for the good
decreases
When price of an input falls, supply of the good
increases
When price of a substitute in production falls, supply of the original good
increases
When price of a complement in production rises, supply of the original good
increases
When the technology used to produce the good improves,
supply increases
When the price is expected to fall in the future, supply of the good
increases today
When the number of sellers rise, the market supply of the good
increases
When the price of an input rises, supply of the good
decreases
When price of a substitute in production rises, supply of the original good
decreases
When price of a complement in production falls, supply of the original good
decreases
When the best technology used to produce the good is no longer available, supply of the good
decreases
When the price is expected to rise in the future, supply of the good
decreases today
When the number of sellers falls, market supply of the good
decreases
A competitive market is in equilibrium when
the price has moved to a level where the quantity of a good demanded is equal to the quantity of that good supplied
Demand and supply increase
Equilibrium quantity increases
Demand and Supply decrease
equilibrium quantity decreases
Demand increases and supply decreases
Equilibrium price increases
Demand decreases and supply increases
Equilibrium price decreases
Note 
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