Economics Unit 2 Vocabulary

Key vocabulary for Irondale Econ unit 2

Demand

the willingness and ability of buyers to purchase different quantities of a good at different prices during a specific time period

Law of demand

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

Change in demand

A shift in demand means that at every price, consumers buy a different quantity than before. (ex. changes in income, consumer expectations, population/number of buyers in a market, consumer tastes/preferences, and the prices of related goods)

Normal Good

a good for which the demand rises as income rises and demand falls as income falls

Inferior good

a good for which the demand falls as income rises and rises as income falls

Neutral good

A good for which the demand remains unchanged as income rises or falls

Substitute

a similar good. The price of one good and the demand for the other move in the same direction

Compliment

a good that is consumed jointly with another good. The price of one and the demand for the other move in opposite directions

Supply

the amount of a good or service that is available

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 Supply

factors that can cause an increase or decrease in supply, at all price levels (ex. changes in resource costs - includes weather, changes in technology, actions by government like taxes, future price expectations, and the number of competitors (sellers) in a market.)

Subsidy

a government payment that supports a business or market

Excise taxes

a tax on the production or sale of a good

Equilibrium

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

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

Barter

the direct exchange of one set of goods or services for another

Rationing

a system of allocating scarce goods and services using criteria other than price