econ vocab unit 2

Demand

the desire to own something and the ability to pay for it

Microeconomics

the study of economic behavior and decision making in small units such as households and firms

Demand Schedule

a table that lists the quantity of a good that a person will purchase at various prices in a market

Demand Curve

a graphic representation of a demand schedule

Law of Demand

consumers will buy more of a good when its price is lower and less when its price is higher

Change in Quantity Demanded

A movement along a given demand curve caused by a change in demand price. The only factor that can cause a change in quantity demanded is price. A related, but distinct, concept is a change in demand.

Income Effect

the change in consumption that results in response to changes in price

Substitution Effect

when a consumer reacts to a rise in the price of one good by consuming less of that good and more of a substitute good

Change in Demand

A change in demand describes a shift in consumer desire to purchase a particular good or service, irrespective of a variation in its price. The change could be triggered by a shift in income levels, consumer tastes, or a different price being charged for a related product.

Normal Good

a good that experiences an increase in its demand due to a rise in consumers' income.

Inferior Goods

an inferior good is a good whose demand decreases when consumer income rises, unlike normal goods, for which the opposite is observed.

Substitute

goods that are used in place of one another

Complements

two goods that are bought and used together

The Law of Diminishing Marginal Utility

The law of diminishing marginal utility states that all else equal, as consumption increases, the marginal utility derived from each additional unit declines. Marginal utility is the incremental increase in utility that results from the consumption of one additional unit. "Utility" is an economic term used to represent satisfaction or happiness.

Supply Schedule

a chart that lists how much of a good or
service a supplier will offer at various prices

Supply Curve

a graph of the quantity supplied of a good or service at various prices

Law of Supply

producers offer more of a good or service as its price increases and less as its price falls

Quantity Supplied

the amount of a good or service that a producer is willing and able to supply at a specific price

Change in Quantity Supplied

the amount of a good or service that a producer is willing and able to supply at a specific price

Change in Supply

A change in supply is an economic term that describes when the suppliers of a given good or service alter production or output. A change in supply can occur as a result of new technologies, such as more efficient or less expensive production processes, or a change in the number of competitors in the market.

Subsidy

a government payment that supports a business or market

Equilibrium

the point at which the demand for a product or
service is equal to the supply of that product or service

Disequilibrium

any price or quantity not at equilibrium; when quantity supplied is not equal to quantity demanded in a market

Shortage

a situation in which consumers want more of a
good or service than producers are willing to make available at a particular price

Surplus

when quantity supplied is more than quantity demanded

Price Ceiling

a maximum price that can legally be charged for a good or service

Price Floor

a minimum price for a good or service