Chapter 4

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Flashcards by murphy94, updated more than 1 year ago
murphy94
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The Market Forces of Supply and Demand

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Question Answer
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
Quantity Demanded the amount of a good that buyers are willing and able to purchase
Law of Demand the claim that, other things being equal, the quantity demanded of a good falls when the price of the good rises
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 good and the quantity demanded
Normal Good a good for which, other things being equal, an increase in income leads to an increase in demand
Inferior Good a good for which, other things being equal, an increase in income leads to a decrease in demand
Substitutes two goods for which an increase in the price of one leads to an increase in the demand for the other
Complements two goods for which an increase in the price of one leads to a decrease in the demand for the other
Price of the good itself... Movement along demand curve
Income... Shifts the demand curve
Prices of related goods... Shifts the demand curve
Tastes Shifts the demand curve
Expectations... Shifts the demand curve
Number of buyers Shifts the demand curve
Quantity Supplied the amount of a good that sellers are willing and able to sell
Law of Supply the claim that, other things being equal, the quantity of a good rises when the price of the good rises
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
Equilibrium a situation in which the market price has reached the level at which quantity supplied equals quantity demanded
Equilibrium Price the price that balances quantity supplied and quantity demanded
Equilibrium Quantity the quantity supplied and the quantity demanded at the equilibrium price
Surplus a situation in which quantity supplied is greater than quantity demanded
Shortage a situation in which quantity demanded is greater than quantity supplied
Law of Supply and Demand the claim that the price of any good adjusts to bring the quantity supplied and the quantity demanded for the good into balance
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