Econ - Supply and Demand vocab

demand

The willingness and ability to purchase an item

demand schedule

a table that shows the quantity demanded of a good or service at different price levels

demand curve

a graph that shows the relationship between the price of a good/service and the quantity demanded within a specified time frame (Any time the price changes…the quantity demanded will change)

(supply to the sky, demand to the sand)

law of demand

as the price goes up - quantity demanded goes down

law of diminishing marginal utility

the more you consume, the less satisfaction you receive from consumption. (lower prices are needed to entice more buying)

change in quantity demanded

a change in the quantity demanded due to price change

a shift in demand

a change in the quantity demanded due to an outside factor (other than price)

substitutes

used in place of another product (competitors)

complements

Commonly purchased items together

supply

How much of a product or a service will be produced and sold.  

law of supply

as price goes up - quantity supplied goes up

Supply has a direct relationship as opposed to demand (indirect)

supply schedule

a table that shows the quantity supplied at each price

supply curve

a graph that shows how a change in the price of a good or service affects the quantity a seller supplies. (supply to the sky, demand to the sand)

quantity supplied

The number of goods produced/sold at each price level.

change in quantity supplied

a change in the quantity supplied due to price change

a shift in supply

a change in the quantity supplied due to an outside factor (other than price)

subsidy

the opposite of taxes…the government PAYS companies to produce something (increase in supply)

equilibrium price

the price on which the consumers and producers agree on

equilibrium quantity

when supply and demand meet (the amount of an item that consumers want to buy is equal to the amount being supplied by its producers)

surplus

supply is greater than demand - causes businesses to lower their prices

shortage (what is it? what are the effects?)

demand is greater than supply - causes businesses to increase their prices

price ceiling

highest price allowed by the government - leads to lower prices and shortages

price floor

the minimum/lowest price allowed by the government - leads to higher prices and a surplus