Principles of Economics Key Terms U3 P1

Unit 3 Key Terms (Part 1) from the Principles Economics of 2e book provided by OpenStax

Ceteris Paribus

Other things being equal

Complements

Goods that are often used together so that consumption of one good tends to enhance consumption of the other

Consumer Surplus

The extra benefit consumers receieve from buying a good or service, measured by what the individuals would have been willing to pay minus the amount that they actually paid

Deadweight Loss

The loss in social surplus that occurs when a market produces an inefficient quantity

Demand

The relationship between price and the quantitiy demanded of a certain good or service

Demand Curve

A graphic representation of the relationship between price and quantity demanded of a certain good or service, with quantity on the horizontal axis and the price of the vertical axis

Demand Schedule

A table that shows a range of prices for a certain good or service and the quantity demanded at each price

Economic Surplus

The sum of consumer surplus and producer surplus

Equilibrium

The situation where quantity demanded is equal to the quanitity supplied; the combination of price and quantity where there is no economic pressure from surpluses or shortages that would cause price or quantity to change

Equilibrium Price

The price where quantity demanded is equal to quantity supplied

Equilibrium Quantity

The quantity at which quantity demanded and quantity supplied are equal for a certain price level

Excess Demand

At the existing price, the quantity demanded exceeds the quantity supplied; also called a shortage

Excess Supply

At the existing price, quantity supplied exceeds the quantity demanded; also called a surplus

Factors of Production

The resources such as labor, materials, and machinery that are used to produce goods and services; also called inputs

Inferior Good

A good in which the quantity demanded falls as income rises, and in which quantity demanded rises and income falls

Inputs

The resources such as labor, materials, and machinery that are used to produce goods and services; also called factors of production

Law of Demand

The common relationship that a higher price leads to a lower quantity demanded of a certain good or service and a lower price leads to a higher quantity demanded,, while all other variables are held constant

Law of Supply

The common relationship that a higher price leads to a greater quantity supplied and a lower price leads to a lower quantity supplied, which all other variables are held constant