Understanding Demand and Supply Curves

Demand Schedule

Displays the quantity demanded at different prices for a good or service.

Demand Curve

Graphical representation of the demand schedule, showing quantity demanded at any given price.

Law of Demand

States that people demand less of a good or service at higher prices, all else being equal.

Shifts of the Demand Curve

Changes in the quantity demanded at any given price, represented by the movement of the original demand curve to a new position.

Movement Along the Demand Curve

Represents a change in quantity demanded caused by a change in price.

TRIBE

Mnemonic device for remembering factors responsible for shifts of the demand curve: Tastes, Related goods, Income, Buyers, Expectations.

Substitutes

Goods where an increase in the price of one causes people to demand more of the other.

Complements

Goods where a decrease in the price of one makes people buy more of the other.

Normal Good

A good for which demand increases when income rises, like housing.

Inferior Good

A good for which demand decreases when income rises, like bus passes.

Supply Schedule

Shows how much of a good or service producers will supply at different prices.

Law of Supply

States that the price and quantity supplied of a good or service are positively related, all else being equal.

Shifts of the Supply Curve

Changes in the quantity supplied at any given price, represented by the movement of the original supply curve to a new position.

I-RENT

Mnemonic device for remembering factors that shift the supply curve: Input prices, Related goods, Producer Expectations, Number of producers, Technology.

Price Controls

Legal restrictions on how high or low a market price may go, including price ceilings and price floors.

Equilibrium Price

Price where quantity demanded equals quantity supplied, also known as market-clearing price.

Equilibrium Quantity

Quantity bought and sold at the equilibrium price.

Quantity Control (Quota)

Upper limit on the quantity of a good that can be bought or sold.

Deadweight Loss

Value of foregone mutually beneficial transactions, caused by market inefficiencies.

Quota Rent

Difference between the demand and supply price at the quota amount.