Demand, Supply, and Markets

Capital

The factories, machines, tools, and inventories in an economy used in producing other goods and services.

Ceteris paribus

Latin for 'with other conditions remaining the same,' used in economics to denote that no other variables are changing.

Complementary goods

Goods that are used together; an increase in the price of one leads to a decrease in the demand for the other.

Demand

The quantities of a good that buyers are willing and able to buy at each price, with other influencing factors held constant.

Economic model

An abstract description of part of an economy, simplified to understand and explain economic events.

Equilibrium

A market condition where the quantity demanded equals the quantity supplied at a certain price.

Equilibrium price

The market price where the quantity demanded and quantity supplied are equal.

Equilibrium quantity

The market quantity where the quantity demanded and quantity supplied are equal.

Inferior goods

Goods for which consumption decreases when income increases.

Inputs

Resources like labor, land, and capital used in producing goods and services.

Law of demand

The principle stating that price and quantity demanded are inversely related.

Law of supply and demand

Indicates that prices and quantities in a competitive market tend toward equilibrium.

Markets

Methods through which buyers and sellers interact to determine prices and quantities of goods.

Movements along a demand curve

Changes in quantity demanded caused by a change in the good's price.

Movements along a supply curve

Changes in quantity supplied caused by a change in the good's price.

Normal goods

Goods for which consumption increases in response to an increase in income.

Quantity demanded

The quantity of a good or service consumers intend to purchase at a specific price.

Quantity supplied

The quantity of a good or service producers intend to sell at a specific price.

Shift in the demand curve

A change in the quantities consumers are willing to purchase at each price due to factors other than price.

Shift in the supply curve

A change in the quantities producers are willing to sell at each price due to factors other than price.

Shortage

A situation where the quantity demanded exceeds the quantity supplied at a specific price.

Substitute goods

Goods that can replace one another; an increase in the price of one leads to an increase in the demand for the other.

Supply

A schedule or graph showing the quantity of a good that producers are willing to supply at each price.

Surplus

A situation where the quantity supplied exceeds the quantity demanded at a specific price.