DEMAND AND SUPPLY

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 receive 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 quantity 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 on 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 see social surplus 

equilibrium the situation where quantity demanded is equal to the quantity 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, while all other variables are held constant 

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

price what a buyer pays for a unit of the specific good or service 

price ceiling a legal maximum price 

price control government laws to regulate prices instead of letting market forces determine prices

price floor a legal minimum price 

producer surplus the extra benefit producers receive from selling a good or service, measured by the price the producer actually received minus the price the producer would have been willing to accept 

quantity demanded the total number of units of a good or service consumers are willing to purchase at a given price 

quantity supplied the total number of units of a good or service producers are willing to sell at a given price 

shift in demand when a change in some economic factor (other than price) causes a different quantity to be demanded at every price 

shift in supply when a change in some economic factor (other than price) causes a different quantity to be supplied at every price 

shortage at the existing price, the quantity demanded exceeds the quantity supplied; also called excess demand 

social surplus the sum of consumer surplus and producer surplus 

substitute a good that can replace another to some extent, so that greater consumption of one good can mean less of the other 

supply the relationship between price and the quantity supplied of a certain good or service

supply curve a line that shows the relationship between price and quantity supplied on a graph, with quantity supplied on the horizontal axis and price on the vertical axis

supply schedule a table that shows a range of prices for a good or service and the quantity supplied at each price 

surplus at the existing price, quantity supplied exceeds the quantity demanded; also called excess supply 

total surplus see social surplus