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Eco 101 ch 3,4
voc words
| Term | Definition |
|---|---|
| absolute advantage | The ability to produce a good using fewer inputs than another producer |
| comparative advantage | the ability to produce a good at a lower opportunity cost than another producer |
| opportunity cost | Whatever must be given up to obtain some item. |
| market | a group of buyers and sellers of a particular good or service. |
| competitive market | a market with many buyers and sellers trading identical products so that each buyer and seller is a price taker. |
| quantitiy demanded | the amount of a good that buyers are willing and able to purchase. |
| 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 a good and the quantity demanded. |
| normal good | a good for which, other things equal, an increase in income leads to an increase in demand. |
| inferior good | a good for which, other things 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 |
| quantity supplied | the amount of a good that sellers are willing and able to sell |
| law of supply | the claim that, other things equal, the quantity supplied of a good rises when the price of the good rises |
| supply schedule | a table that shows the relationship between the price of agood 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 that good into balance |
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