Macroeconomics - Demand, Supply, and Market Equilibrium

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These flashcards cover key vocabulary related to macroeconomics concepts of demand, supply, market equilibrium, and government interventions.

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18 Terms

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Demand

A schedule or curve that shows the various amounts of a product that consumers are willing and able to purchase at each of a series of possible prices during specified periods of time.

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Law of Demand

States that other things equal, as price falls, the quantity demanded rises, and as price rises, the quantity demanded falls.

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Determinants of Demand

Factors that cause the demand curve to shift, including changes in consumer tastes, number of buyers, income, prices of related goods, and consumer expectations.

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Supply

A schedule or curve that shows the various amounts of a product that producers are willing and able to make available for sale at each of a series of possible prices during a specified period of time.

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Law of Supply

States that other things equal, as the price rises, the quantity supplied rises, and as the price falls, the quantity supplied falls.

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Market Equilibrium

Occurs where the demand curve and supply curve intersect, determining the equilibrium price and quantity.

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Price Ceiling

A government-set price limit below which a product may not be sold, often leading to shortages.

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Price Floor

A government-set minimum price above the market price, leading to chronic surpluses.

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Efficient Allocation

Producing the right mix of goods that is most highly valued by society, achievable through productive and allocative efficiency.

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Substitute Goods

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

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Complementary Goods

Goods that are used together; a decrease in the price of one leads to an increase in demand for the other.

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Shortage

A situation where demand exceeds supply at a given price.

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Surplus

A situation where supply exceeds demand at a given price.

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Marginal Utility

The additional satisfaction received from consuming one more unit of a product.

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Rationing Function of Prices

The ability of the forces of demand and supply to establish a price at which buying and selling decisions are consistent.

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Change in Consumer Tastes

A determinant of demand where shifts in preferences can increase or decrease the demand for certain products.

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Market Demand

The total quantity of goods demanded by all consumers in a market at various prices.

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Individual Demand

The quantity of a product that a single consumer is willing and able to purchase at various prices.