Micro Ch 04 | Demand and Supply

Markets

Dynamic interactions between buyers and sellers where exchanges occur.

Competition

Rivalry among buyers and sellers to achieve the best deals or attract customers.

Cooperation

Voluntary transactions where both buyers and sellers benefit.

Marginal Benefit

The additional value a buyer gains from consuming one more unit of a product.

Marginal Opportunity Cost

The cost to sellers of producing one more unit of a product.

Property Rights

Legal rights ensuring ownership and protection of physical, financial, or intellectual assets.

Demand

The quantity of a product consumers are willing and able to purchase at various prices.

Supply

The quantity of a product businesses are willing and able to offer at various prices.

Equilibrium

The price point where quantity demanded equals quantity supplied.

Shortage

A situation where demand exceeds supply at a given price.

Surplus

A situation where supply exceeds demand at a given price.

Self-Interest

The motivation of individuals to pursue their own benefits in market transactions.

Invisible Hand

The concept that self-interested actions in markets lead to efficient outcomes.

Price Signals

Indicators that guide businesses and consumers to adjust supply and demand.

Quantity Adjustments

Changes in the amount of goods supplied or demanded in response to market conditions.

Market-Clearing Price

The price at which quantity demanded equals quantity supplied, ensuring no surplus or shortage.

Equilibrium Price

The price where demand and supply forces are balanced, with no tendency for change.

Quantity Demanded

The amount of a good or service consumers are willing to buy at a specific price.

Quantity Supplied

The amount of a good or service producers are willing to sell at a specific price.

Goldilocks Zone

An economic metaphor for prices that are "just right" to satisfy both buyers and sellers.

Invisible Hand

Adam Smith's metaphor for the market's ability to channel self-interest into societal benefit.

Price Signals

Indicators that guide businesses and consumers to make smart economic choices.

Resources

Inputs used to produce goods and services, such as labor, capital, and materials.

Preferences

Consumer choices and priorities that influence demand in the market.

Surplus

A situation where quantity supplied exceeds quantity demanded at a given price.

Shortage

A situation where quantity demanded exceeds quantity supplied at a given price.

Competition

The rivalry among sellers to attract consumers and maximize profits.

Cooperation

The interaction between buyers and sellers to achieve mutually beneficial outcomes.

Efficiency

The optimal allocation of resources to maximize societal benefit.

Self-Interest

The pursuit of personal benefit in economic decision-making.

Equilibrium Price

The price at which the quantity demanded equals the quantity supplied in a market.

Equilibrium Quantity

The quantity of goods or services exchanged at the equilibrium price.

Demand Curve

A graph showing the relationship between the price of a good and the quantity demanded.

Supply Curve

A graph showing the relationship between the price of a good and the quantity supplied.

Rightward Shift

A movement of the demand or supply curve to the right, indicating an increase in demand or supply.

Leftward Shift

A movement of the demand or supply curve to the left, indicating a decrease in demand or supply.

Preferences

Consumer tastes and choices that influence demand for goods and services.

Technology

Advancements that affect production efficiency and supply.

Income

The earnings of consumers, which influence their purchasing power and demand.

Input Costs

The expenses incurred in producing goods, which affect supply.

Increase in Supply

A situation where more goods are available at every price, shifting the supply curve rightward.

Decrease in Supply

A situation where fewer goods are available at every price, shifting the supply curve leftward.

Market Dynamics

The constant adjustments in prices and quantities due to changes in demand and supply.

Expected Future Prices

Predictions about future prices that influence current demand.

Economic Conditions

The state of the economy, which impacts demand and supply.

Demand

The quantity of a good or service consumers are willing and able to purchase at various prices.

Supply

The quantity of a good or service producers are willing and able to offer at various prices.

Equilibrium Price

The price at which the quantity demanded equals the quantity supplied.

Equilibrium Quantity

The quantity of goods or services exchanged at the equilibrium price.

Comparative Statics

A modeling technique used to analyze the impact of changes in demand or supply on market outcomes.

Demand Curve

A graph showing the relationship between price and quantity demanded.

Supply Curve

A graph showing the relationship between price and quantity supplied.

Increase in Demand

A shift of the demand curve to the right, indicating higher quantity demanded at each price.

Decrease in Demand

A shift of the demand curve to the left, indicating lower quantity demanded at each price.

Increase in Supply

A shift of the supply curve to the right, indicating higher quantity supplied at each price.

Decrease in Supply

A shift of the supply curve to the left, indicating lower quantity supplied at each price.

Market Dynamics

The interplay between demand and supply that determines price and quantity in a market.

Static Equilibrium

A state where market forces are balanced, with no external changes affecting price or quantity.

Tug-of-War

The conflicting effects of simultaneous changes in demand and supply on price and quantity.

Modeling Technique

A method used by economists to simplify and analyze complex market behaviors.

Consumer Surplus

The difference between what consumers are willing to pay and the price they actually pay

Producer Surplus

The difference between the price producers receive and their minimum acceptable price

Economic Efficiency

A state where resources are allocated to produce the right products at the right prices, maximizing total surplus.

Deadweight Loss

The loss of total surplus due to inefficiencies, such as producing too much or too little relative to the efficient quantity.

Equilibrium Price

The price at which quantity demanded equals quantity supplied, ensuring market balance.

Marginal Benefit Curve

A graphical representation of the additional benefit consumers receive from consuming one more unit of a good.

Marginal Cost Curve

A graphical representation of the additional cost producers incur from producing one more unit of a good.

Total Surplus

The sum of consumer surplus and producer surplus, representing the overall benefit to society from market transactions.

Opportunity Cost

The value of the next best alternative foregone when making a choice.

Efficient Quantity

The quantity of goods produced where marginal benefit equals marginal cost, maximizing total surplus.

Demand Curve

A graphical representation of the relationship between the price of a good and the quantity demanded.

Supply Curve

A graphical representation of the relationship between the price of a good and the quantity supplied.

Scarce Resources

Limited resources that must be allocated efficiently to maximize benefits.

Market Efficiency

The optimal allocation of resources in a market, where total surplus is maximized.

Surplus Area

The graphical representation of consumer or producer surplus on a market graph.