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Economics Ch 7

Notes and vocabulary

The amount of a good or service that consumers are able and willing to buy at various possible prices during a specific time period Demand
The amount of a good or service that producers are able and willing to sell at various prices during a specific time period Supply
Freely chosen activity between buyers and sellers of goods and services. Market
A transaction in which a buyer and a seller exercise their economic freedom by working out their own terms of exchange Voluntary exchange
Economic rule stating that the quantity demanded and price move in opposite directions Law of Demand
Amount of a good or service that a consumer is willing and able to purchase at a specific price Quantity demanded
Economic rule stating that individuals cannot keep buying the same quantity of a product if it's price rises while their income stays the same. Real income effect
Economic rule stating that if two items satisfy the same need and the price of one rises, people will buy the other. Substitution effect
The ability of any good or service to satisfy consumer wants; amount of satisfaction one gets from a good or service. Utility
An additional amount of satisfaction Marginal utility
Economic rule stating that the additional satisfaction a consumer gets from purchasing one more unit of a product will lessen with each additional unit purchased. Law of Diminishing marginal utility
Table showing quantities demanded at different possible prices. Demand schedule
Downward-sloping line that graphically shows the quantities demanded at each possible price. Demand curve
A product often used with another product; as the price of the second product decreases, the demand for the first product increases. Complementary good
Economic concept dealing with consumers responsiveness to an increase or decrease in price. Elasticity
Economic concept that deals with how much demand varies according to changes in price. Price elasticity of demand
Situation in which the rise or fall in a products price greatly affects the amount that people are willing to buy. Elastic demand
Situation in which a products price change has little impact on the quantity demanded by consumers. Inelastic demand
Economic rule stating that price and quantity supplied move in the same direction. Law of supply
The amount of a good or service that a producer is willing and able to supply at a specific price. Quantity supplied
Table showing quantities supplied at different possible prices. Supply schedule
Upward-sloping line that graphically shows the quantities supplied at each possible price. Supply curve
Advance in knowledge leading to new and improved goods and services and better ways of producing them. Technology
Economic rule that says so more units of a factor of production are added to other factors of production total output continues to increase but at a diminishing rate. Law of diminishing returns
The price at which the amount producers are willing to supply is equal to the amount consumers are willing to buy Equilibrium price
Situation in which the quantity demanded is greater than the quantity supplied. Shortage
Situation in which the quantity supplied is greater than the quantity demanded. Surplus
A legal maximum price that may be charged for a particular good or service. Price ceiling
Distribution of goods and services based on something other than price. Rationing
"Underground" or illegal market in which goods are traded at prices above their legal maximum prices or in which illegal goods are sold. Black market
A legal minimum price below a good or service may not be sold. Price floor
Created by: MelissaSueAnn