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MARKET
a group of buyers and sellers of a particular good or service
COMPETITIVE MARKET
a market in which there are many buyers and many sellers so that each has a negligible impact on the market price
PERFECTLY COMPETITIVE MARKET
all goods offered for sale are exactly the same; Many buyers and sellers; no single buyer or seller has any influence over the market price
LAW OF DEMAND
the claim that the quantity demanded of a good falls when the price of the good rises, other things equal
QUANTITY DEMANDED
refers to the specific amount of a good that consumers are willing and able to purchase at a given price
DEMAND SCHEDULE
a table that shows the relationship between the price of a good and the quantity demanded
DEMAND CURVE
a graph of the relationship between the price of a good and the quantity demanded
MARKET DEMAND
is the sum of all of the individual demands for a particular good or service.
DEMAND CURVE SHIFTERS (5)
factors that cause the demand curve to shift left or right, indicating changes in consumer demand.
INCOME
PRICES OF RELATED GOODS
TASTE
NUMBER OF BUYERS
EXPECTATIONS
NORMAL GOOD
an increase in income leads to an increase in demand
D shifts to the RIGHT
INFERIOR GOOD
an increase in income leads to a decrease in demand
D shifts to the LEFT
SUBSTITUTES
goods that can replace each other; when the price of one rises, the demand for the other increases.
COMPLEMENTS
goods that are consumed together; when the price of one increases, the demand for the other decreases.
TASTE
The most obvious determinant of your demand.
D shifts depending on consumer preferences and trends.
EXPECTATIONS
Your expectations about the future may affect your demand for a good or service today; if consumers expect prices to rise, they may buy more now.
LAW OF SUPPLY
the claim that the quantity supplied of a good rises when the price of the good rises, other things equal. This principle reflects the direct relationship between price and quantity supplied in a market.
SUPPLY
comes from the behavior of the sellers
DEMAND
comes from the behavior of the buyers
QUANTITY SUPPLIED
the amount that sellers are willing and able to sell.
SUPPLY SCHEDULE
A table that shows the relationship between the price of a good and the quantity supplied.
SUPPLY CURVE
a graph of the relationship between the price of a good and the quantity supplied
SUPPLY CURVEE SHIFTERS (4)
factors that cause the supply curve to shift left or right, indicating changes in quantity supplied
INPUT PRICES
TECHNOLOGY
NUMBER OF SELLERS
EXPECTATIONS
EQUILIBRIUM
P has reached the level where quantity supplied equals quantity demand
TRUE/FALSE
In market economies, prices are the signals that guide economic decisions and allocate scarce resources
