[ECON 11] Demand, Supply, and Market Equilibrium

Quantity Demanded

The amount of a product that a household would buy in a given period if it could buy all it wanted at the current market price.

Demand Schedule

A table showing how much of a given product a household would be willing to buy at different prices.

Demand Curve

A graph illustrating how much of a given product a household would be willing to buy at different prices.

Law of Demand

The negative relationship between price and quantity demanded.

incomes and wealth

The Y-axis holds the household’s _____ and _____.

time

The X-axis holds the household’s _____.

Law of Diminishing Marginal Utility

Household are only willing to buy goods and services up to the point that they are satisfied.

negative

The demand curve has a _____ slope.

income

The sum of all a household’s wages, salaries, profits, interest payments, rents, and other forms of earning in a given period of time.

wealth or net worth

The total value of what a household owns minus what it owes.

Normal Goods

Goods for which demand goes up when income is higher and for which demand goes down when income is lower.

Inferior Goods

Goods for which demand tends to fall when income rises.

Substitues

Goods that can serve as replacements for one another; when the price of one increases, demand for the other increases.

Perfect Substitues

Identical products

Complementary Goods

Goods that “go together”; a decrease in the price of one results in an increase in demand for the other and vice versa.

Market Demand

The sum of all the quantities of a good or service demanded per period by all the households buying in the market for that good or service.

Profit

The difference between revenues and costs.

Quantity Supplied

The amount of a particular product that a firm would be willing and able to offer for sale at a particular price during a given time period.

Supply Schedule

A table showing how much of a product firms will sell at different prices.

Supply Curve

A graph illustrating how much of a product a firm will sell at different prices.

Law of Supply

The positive relationship between price and quantity of a good supplied: An increase in market price will lead to an increase in quantity supplied, and a decrease in market price will lead to a decrease in quantity supplied.

technologies and the prices and quantities of the inputs, government policies, and special influences

What are the factors that affect the cost of production?

Equilibrium

The condition that exists when quantity supplied and quantity demanded are equal.

Excess Demand or Shortage

The condition that exists when quantity demanded exceeds quantity supplied at the current price.

Excess Supply or Surplus

The condition that exists when quantity supplied exceeds quantity demanded at the current price.

Firm 

An organization that transforms resources into products.

Entrepreneur

A person who organizes, manages, and assumes the risks of a firm, taking a new idea or a new product and turning it into a successful business.

Households

The consuming units in an economy.

Product or Output Markets 

The markets in which goods and services are exchanged.

Input or Factor Markets

The markets in which the resources used to produce products are exchanged.

Labor Market

The input/factor market in which households supply work for wages to firms that demand labor.

Capital Market

The input/factor market in which households supply their savings, for interest or for claims to future profits, to firms that demand duns to buy capital goods.

Land Market

The input/factor market in which households supply land or other real property in exchange for rent.

Price Floor

A minimum price below which exchange is not permitted.

Minimum Wage

A price floor set for the price of labor.

Queuing

Waiting in line as a means of distributing goods and services: a nonprice rationing mechanism.

Price Ceiling

A maximum price that sellers may charge for a good, usually set by the government.

Favored Customers

Those who receive special treatment from dealers during situations of excess demand.

Ration Coupons

Tickets or coupons that entitle individuals to purchase a certain amount of a given product per month.

Black Market

A market in which illegal trading takes place at market-demanded prices.