Principles of Macroeconomics 3e - Demand and Supply

A collection of vocabulary flashcards based on the key concepts from the Principles of Macroeconomics 3e, focusing on demand, supply, equilibrium, and related economic terms.

Demand

The amount of some good or service consumers are willing and able to purchase at each price.

Price

The amount a buyer pays for a unit of the specific good or service.

Quantity Demanded

The total number of units of a good or service consumers are willing to purchase at a given price.

Law of Demand

If price goes up, then quantity demanded goes down; if price goes down, then quantity demanded goes up.

Demand Schedule

A table that shows a range of prices for a certain good or service and the quantity demanded at each price.

Demand Curve

A graphic representation of the relationship between price and quantity demanded, with quantity on the horizontal axis and price on the vertical axis.

Supply

The amount of some good or service a producer is willing to supply at each price.

Quantity Supplied

The total number of units of a good or service producers are willing to sell at a given price.

Law of Supply

If price goes up, then quantity supplied goes up; if price goes down, then quantity supplied goes down.

Equilibrium

The combination of price and quantity where there is no economic pressure from surpluses or shortages.

Equilibrium Price

The price where quantity demanded is equal to quantity supplied.

Surplus

At the existing price, quantity supplied exceeds the quantity demanded.

Shortage

At the existing price, quantity demanded exceeds the quantity supplied.

Ceteris Paribus

A Latin phrase meaning 'other things being equal' used in economic analysis.

Normal Good

A product whose demand rises when income rises, and vice versa.

Inferior Good

A product whose demand falls when income rises, and rises when income falls.

Substitutes

Goods or services that can be used in place of another good or service.

Complements

Goods or services that are often used together, where consumption of one enhances consumption of the other.

Price Ceiling

A legal maximum price that one pays for some good or service, preventing the price from rising above a certain level.

Price Floor

The lowest price that one can legally pay for some good or service, preventing the price from falling below a given level.

Consumer Surplus

The amount that individuals were willing to pay minus the amount they actually paid.

Producer Surplus

The price the producer actually received minus the price the producer would have been willing to accept.

Social Surplus

The total surplus calculated as consumer surplus plus producer surplus.

Deadweight Loss

The loss in social surplus that occurs when a market produces an inefficient quantity.