Principles of Economics: The Market Forces of Supply and Demand

These flashcards cover essential vocabulary related to market forces, supply and demand in economics.

Market

A group of buyers and sellers of a particular good or service.

Law of Demand

The claim that, other things being equal, the quantity demanded of a good falls when the price of the good rises.

Demand Schedule

A table that shows the relationship between the price of a good and the quantity demanded.

Equilibrium

Price has reached the level where quantity supplied equals quantity demanded.

Price Ceiling

Legal maximum on the price of a good or service.

Price Floor

Legal minimum on the price of a good or service.

Surplus

When quantity supplied is greater than quantity demanded.

Shortage

When quantity demanded is greater than quantity supplied.

Supply Curve

The graphical representation showing how price affects quantity supplied, other things being equal.

Demand Curve

The graphical representation showing how price affects quantity demanded, other things being equal.

Normal Good

A good for which demand increases as income increases.

Inferior Good

A good for which demand decreases as income increases.

Substitutes

Goods that can be used in place of each other; when the price of one decreases, the demand for the other decreases.

Complements

Goods that are used together; when the price of one decreases, the demand for the other increases.

Input Prices

The costs of the various products required to produce a good or service.

Market Equilibrium

The point where supply and demand meet, resulting in the equilibrium price and quantity.