Unit 2: Supply, Demand & Price Flashcards

Demand

The desire and ability to buy a good or service.

Supply

The amount of a good or service producers are willing and able to sell.

Quantity demanded

The amount consumers will buy at a specific price.

Quantity supplied

The amount producers will sell at a specific price.

Law of demand

When price goes up, quantity demanded goes down. When price goes down, quantity demanded goes up.

Law of supply

When price goes up, quantity supplied goes up. When price goes down, quantity supplied goes down.

Demand curve

A graph showing the relationship between price and quantity demanded.

Supply curve

A graph showing the relationship between price and quantity supplied.

Equilibrium

The point where quantity supplied equals quantity demanded.

Equilibrium price

The price at which quantity supplied equals quantity demanded.

Equilibrium quantity

The amount bought and sold at equilibrium.

Shortage

When quantity demanded is greater than quantity supplied.

Surplus

When quantity supplied is greater than quantity demanded.

Substitute

A product that can replace another product.

Complement

A product that is usually used with another product.

Input

A resource used to produce a good or service.

Subsidy

Money given by the government to support producers or consumers.

Tax

Money collected by the government that increases costs.

Consumer

A person who buys goods or services.

Producer

A person or business that makes or sells goods or services.

Market

A place or system where buyers and sellers exchange goods or services.

Price signal

Information that prices give to consumers and producers about what to buy or produce.

Incentive

Something that encourages someone to take an action.

Normal good

A good people buy more of when their income increases.

Inferior good

A good people buy less of when their income increases.