Chapter 3: Demand and Supply

Vocabulary flashcards covering demand, supply, market structures, shifters, equilibrium, and terminology from Chapter 3.

Market

Any arrangement that allows buyers and sellers of a particular good or service to interact.

Perfectly Competitive Market

A market characterized by many buyers and sellers, identical products, price-taker participants, free entry and exit for firms, and good information about prices and products.

Price Takers

Buyers and sellers in a market who cannot individually affect the market price.

Quantity Demanded

The amount of a good consumers are willing and able to buy at a specific price during a given period, ceteris paribus.

Demand Schedule

A table that shows the quantities of a good or service demanded at different prices during a particular period, all other things unchanged.

Demand Curve

A graphical representation of a demand schedule.

Law of Demand

The principle stating that, all other things unchanged, a higher price leads to a reduction in quantity demanded and a lower price leads to an increase in quantity demanded.

Demand Curve Shifters

Factors that shift the demand curve, consisting of the number of buyers, income, price of related goods, tastes and preferences, and expectations.

Normal Good

A good for which demand increases when income increases, shifting the demand curve to the right.

Inferior Good

A good for which demand decreases when income increases, shifting the demand curve to the left.

Substitutes

Goods that can replace one another, such that an increase in the price of one good increases demand for the other.

Complements

Goods commonly used together, such that an increase in the price of one good decreases demand for the other.

Quantity Supplied

The amount of a good that sellers are willing and able to sell at a specific price during a given period, other things being equal.

Supply Schedule

A table that shows quantities supplied at different prices during a particular period, all other things unchanged.

Supply Curve

A graphical representation of a supply schedule.

Law of Supply

The principle indicating that for most goods and services, a higher price leads to an increase in the quantity supplied.

Supply Curve Shifters

Factors that shift the supply curve, consisting of input prices, technology, number of sellers, natural events, and seller expectations.

Equilibrium Price

The price at which quantity demanded equals quantity supplied.

Equilibrium Quantity

The quantity bought and sold at the equilibrium price.

Surplus

A condition that occurs when quantity supplied exceeds quantity demanded at the current price.

Shortage

A condition that occurs when quantity demanded exceeds quantity supplied at the current price.

Change in Quantity Demanded

Movement along a fixed demand curve caused by a change in the good's price.

Change in Demand

Shift of the demand curve caused by a non-price determinant.

Change in Quantity Supplied

Movement along a fixed supply curve caused by a change in the good's price.

Change in Supply

Shift of the supply curve caused by a non-price determinant.