Markets and Equilibrium

These flashcards cover key vocabulary related to market principles and economics, focusing on definitions and important concepts discussed in class.

Market

A place where buyers and sellers interact to exchange goods and services.

Market Equilibrium

The condition where quantity supplied equals quantity demanded at a given price.

Surplus

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

Shortage

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

Elasticity

A measure of how sensitive the quantity demanded or supplied of a good is to changes in price.

Economic Surplus (ES)

The sum of consumer surplus (CS) and producer surplus (PS); it measures the welfare to society.

Invisible Hand

A principle stating that market prices coordinate the actions of individuals towards activities that promote societal economic well-being.

Perfectly Competitive Market

A market structure characterized by many buyers and sellers, homogenous products, perfect information, and no barriers to entry.

Price as an Allocation Mechanism

Price determines how resources are distributed among consumers based on their willingness and ability to pay.

Ceteris Paribus

A Latin phrase meaning 'all other things being equal,' used to isolate the effect of one variable.