Chapter 3, 4: Supply and Demand market efficiency and market failure

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26 Terms

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Market
A place where buyers and sellers meet, which can be physical or online.
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Law of Demand
When the price increases, quantity demanded decreases; when the price decreases, quantity demanded increases.
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Demand Schedule
A table showing how much people will buy at different prices.
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Demand Curve
A graph showing the relationship between price and quantity demanded.
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Market Demand
The total demand from all buyers.
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Substitutes
Goods that can replace each other; if the price of one goes up, demand for the other increases.
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Complements
Goods that are used together; if the price of one goes up, demand for both decreases.
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Normal Goods
Goods for which demand increases when income increases.
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Inferior Goods
Goods for which demand decreases when income increases.
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Change in Demand
A shift in demand caused by factors other than price.
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Law of Supply
When price increases, quantity supplied increases; when price decreases, quantity supplied decreases.
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Supply Schedule
A table showing how much sellers will offer at different prices.
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Supply Curve
A graph showing the relationship between price and quantity supplied.
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Market Supply
The total supply from all sellers.
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Change in Supply
A shift in supply caused by factors other than price.
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Market Equilibrium
The point when quantity demanded equals quantity supplied.
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Equilibrium Price
The price where supply and demand are balanced.
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Consumer Surplus
The difference between what a consumer is willing to pay and the actual price paid.
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Producer Surplus
The difference between the lowest price a seller would accept and the actual price received.
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Deadweight Loss
A loss of economic efficiency that occurs when markets are not in equilibrium.
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Price Ceiling
A legal limit on how high a price can be set, often leading to shortages.
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Price Floor
A legal limit on how low a price can be set, often leading to surpluses.
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Externality
A cost or benefit affecting people not directly involved in a market.
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Negative Externality
Harmful effects that impact third parties, such as pollution.
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Positive Externality
Beneficial effects that impact third parties, such as education.
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Tradable Emissions Permits
A system where companies can buy or sell permits to pollute, aimed at limiting overall pollution.