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Demand, Supply, and Market Equilibrium Terms in this set (50)Who are the economy's most competitive markets? wheat market, stock market, & the market for foreign currencies. All such markets involve demand, supply, price & quantity. demand schedule a table of numbers showing the amounts of a good or service buyers are willing & able to purchase at various prices over a specified period of time. Law of Demand The principle that, other things equal, an increase in a product's price will reduce the quantity of it demanded, and conversely for a decrease in price. diminishing marginal utility the principle that our additional satisfaction, or our marginal utility, tends to go down as more and more units are consumed income effect a lower price increases the purchasing power of a buyer's money income, enabling the buyer to purchase more of the product than before substitution effect buyers have an incentive to substitute a product whose price has fallen for other product whose prices have remained the same. demand curve A curve that illustrates the demand for a product by showing how each possible price (on the vertical axis) is associated with a specific quantity demanded (on the horizontal axis). Its downward slope reflects the law of demand - people buy more of a product, service, or resource its price falls. What are the determinants of demand? -Consumer Income Change in Demand vs. Change in Quantity Demanded A change in demand is when the whole curve shifts and a change in quantity demanded is movement along the demand curve due to a change in price. Price Doesn't shift the curve. Normal goods A good or service whose consumption increases when income increases and falls when income decreases, price remaining constant. Inferior goods are goods that consumers demand less of when their incomes increase substitute goods Products or services that can be used in place of each other. When the price of one falls, the demand for the other product falls; conversely, when the price of one product rises, the demand for the other product rises. complementary goods Products and services that are used together. When the price of one falls, the demand for the other increases (and conversely). independent goods goods that are not related to one another. a change in the price of one has little or no effect on the demand for the other. What causes an increase in demand? change in buyer tastes a supply schedule a table that shows the relationship between the price of a good and the quantity supplied Law of Supply The principle that, other things equal, an increase in the price of a product will increase the quantity of it supplied, and conversely for a price decrease. The upward slope of the curve reflects the law of supply-producers offer more of a good service, or resource for sale as its price rises. marginal cost the cost of producing one more unit of output What are the determinants of supply? resource prices, technology, taxes and subsidies, prices of other goods, producer expectations, and the number of sellers in the market. An increase in supply is shown as a rightward shift of the supply curve. A decrease in supply is depicted as a leftward shift of the curve. supply curve A curve that illustrates the supply for a product by showing how each possible price (on the vertical axis) is associated with a specific quantity supplied (on the horizontal axis). The supply curve is a upward sloping curve. change in supply A movement of an entire supply curve or schedule such that the quantity supplied changes at every particular price; caused by a change in one or more of the determinants of supply. change in quantity supplied a movement from one point to another on a fixed supply curve. The cause of this movement is a change in the price of the specified product being considered. equilibrium price The price in a competitive market at which the quantity demanded and the quantity supplied are equal, there is neither a shortage nor a surplus, and there is no tendency for price to rise or fall. equilibrium quantity (1) The quantity at which the intentions of buyers and sellers in a particular market match at a particular price such that the quantity demanded and the quantity supplied are equal; (2) the profit-maximizing output of a firm. surplus The amount by which the quantity supplied of a product exceeds the quantity demanded at a specific (above-equilibrium) price. shortage The amount by which the quantity demanded of a product exceeds the quantity supplied at a particular (below-equilibrium) price. rationing function of prices the ability of the forces of supply & demand to establish a price at which selling & buying decisions are consistent. productive efficiency a situation in which a good or service is produced at the lowest possible cost allocative efficiency the particular mix of goods and services most highly valued by society(minimum-cost production assumed) price ceiling a legally established maximum price for a good or service. Normally set at a price below the equilibrium. Black markets are associated with: ceiling prices and the resulting product shortages. price floor a minimum price for a good or service. Normally set at a price above the equilibrium. What are the characteristics of a competitive market? 1.
A large number of buyers & sellers. The inverse relationship between price & quantity demanded can be graphically illustrated by the downward sloping curve. Which of the following specifically refers to demand? the buyer side of any market. The demand curve shows the inverse relationship between: price and quantity demanded for a product. The demand for a normal good would likely increase in which of the following cases? an increase in the number of buyers The willingness & ability of a consumer to buy a normal product falls because of a fall in income. Which exemplifies a pair of complementary goods? a hot dog & relish. Which exemplifies a pair of substitute goods? hot dogs & hamburgers Which of the following types of goods affect the demand for another product due to a change in their price? complementary & substitute goods. When the price of a product falls, demand for its substitute will decrease The supply curve illustrates the relationship between: price & quantity supplied. When the price of one product rises, the demand for its substitute will: increase According to the law of supply, price & quantity have a direct/positive relationship. What determines market price & equilibrium output in a market? the interactions of buyers & sellers. an example of an excise tax is a tariff An example of a price floor is minimum wage price ceilings create shortages When a government want to hold prices down to favor buyers, it imposes a price ceiling. Sets with similar termsMacroeconomics (Eco 12) Chapter 3 Demand, Supply a…33 terms Stephanie_Pujols5 Economics38 terms Rachswanner Chapter 333 terms Sarah_McCance Chapter 3 Macro39 terms mackenzie_allen1 Other sets by this creatorRetail Marketing EXAM 3 Chapter 12-15247 terms slgarzaPLUS BANA 2372 Chapter 811 terms slgarzaPLUS MKTG 3335 Chapter 15 Vocabulary62 terms slgarzaPLUS MKTG 3335 Chapter 15 Smart Book58 terms slgarzaPLUS Verified questionsECONOMICS At what time does marginal product equal total product? Verified answer ECONOMICS Name two new developments in the way Americans work. Verified answer
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Which of the following will cause the demand for a normal good to increase quizlet?Which of the following will cause the demand for a normal good to increase? A decrease in the price of a complementary good.
Which of the following would cause an increase in the demand for a good?a) The price of a complementary good increased. When two goods are complements, their cross-price elasticity of demand is negative meaning that the demand for one increases as the price of the other increases and vice versa.
Which of the following is likely to cause an increase in the demand for a good or service multiple choice question?a rise in the price of one of the goods leads to an increase in the demand for the other good.
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In which of the following cases the demand for a normal good would likely increase quizlet?
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