ECO 176 - Chapter 4: Demand, Supply, and Market Equilibrium

Vocabulary practice flashcards for Chapter 4 Microeconomics covering demand, supply, determinants, shifts versus movements, and market equilibrium.

Market

A group of buyers (consumers) and sellers (producers) who exchange a good or service for payment.

Competitive Market

A market with many buyers and sellers where each participant has a negligible effect on the market price.

Price Takers

Buyers and sellers in a perfectly competitive market who must accept the prevailing market price and have no influence over it.

Quantity Demanded

The amount of a good that buyers are willing and able to purchase at a specific price.

Law of Demand

The principle stating that, other things being equal, there is a negative (inverse) relationship between the price of a good and the quantity demanded.

Demand Schedule

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

Market Demand

The sum of all individual quantities demanded by buyers in a market at each given price level.

Substitutes

Two goods for which an increase in the price of one leads to an increase in the demand for the other (e.g., Coke and Pepsi).

Complements

Two goods for which an increase in the price of one leads to a decrease in the demand for the other (e.g., computers and software).

Demand Curve Shifters

Non-price determinants that cause the entire demand curve to shift, including income, prices of related goods, tastes, expectations, and the number of buyers.

Quantity Supplied

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

Law of Supply

The principle stating that, other things being equal, an increase in the price of a good leads to an increase in the quantity supplied.

Supply Schedule

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

Market Supply

The sum of the quantities supplied by all sellers in a market at each given price level.

Substitutes in Production

Goods that can be produced using the same production resources in place of one another, such as gasoline and heating oil.

Complements in Production

Goods that are produced jointly from a single production process, such as crude oil and natural gas from an oil well.

Supply Curve Shifters

Non-price determinants that shift the supply curve, including input prices, technology, expectations, and the number of sellers.

Change in Demand vs. Change in Quantity Demanded

A change in demand is a shift of the demand curve caused by non-price determinants, whereas a change in quantity demanded is a movement along the demand curve caused by a change in the good's own price.

Change in Supply vs. Change in Quantity Supplied

A change in supply is a shift of the supply curve caused by non-price determinants, whereas a change in quantity supplied is a movement along the supply curve caused by a change in the good's own price.

Equilibrium Price Signals

Prices that adjust to balance supply and demand in market economies, guiding economic decisions and allocating scarce resources.