Demand and Supply in Economics

These flashcards cover essential terms and definitions related to the concepts of demand and supply in economics, useful for exam preparation.

Quantity Demanded

The amount of a good that buyers are willing and able to purchase.

Law of Demand

States that there is an inverse relationship between price and quantity demanded.

Demand Schedule

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

Ceteris Paribus

A Latin phrase meaning 'other things being equal', assuming all variables other than the ones being studied are constant.

Change in Quantity Demanded

Movement along the demand curve due to a change in the price of the good or service.

Change in Demand

A shift in the demand curve caused by a change in a determinant other than price.

Normal Good

A good for which demand increases as consumer income increases.

Inferior Good

A good for which demand decreases as consumer income increases.

Substitutes

Goods where a fall in the price of one reduces the demand for another.

Complements

Goods where a fall in the price of one increases the demand for another.

Quantity Supplied

The amount of a good that sellers are willing and able to sell.

Law of Supply

States that there is a direct relationship between price and quantity supplied.

Market Supply

The sum of all individual supplies for all sellers of a particular good or service.

Change in Quantity Supplied

Movement along the supply curve due to a change in the price of the good or service.

Change in Supply

A shift in the supply curve caused by a change in a determinant other than price.

Equilibrium Price

The price that balances supply and demand, where the supply and demand curves intersect.

Excess Supply (Surplus)

When the price is above the equilibrium price, the quantity supplied exceeds the quantity demanded.

Excess Demand (Shortage)

When the price is below the equilibrium price, the quantity demanded exceeds the quantity supplied.

Determinants of Demand

Factors that can cause the demand curve to shift, including consumer income, price of substitutes/complements, and consumer expectations.

Determinants of Supply

Factors that can cause the supply curve to shift, including cost of production, number of sellers, and technology.

Consumer Income

A factor affecting demand, where an increase in income will increase demand for normal goods and decrease demand for inferior goods.