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Macro Chapter 3
| Term | Definition |
|---|---|
| market economy | an economy in which resources are allocated among households and firms with little or no government interference (page 72) |
| invisible hand | a phrase coined by Adam Smith to refer to the unobservable market forces that guide resources to their highest-valued use (page 72) |
| competitive market | a market in which there are so many buyers and sellers that each has only a small (negligible) impact on the market price and output (page 72) |
| imperfect market | a market in which either the buyer or the seller has an influence on the market price (page 74) |
| market power | a firm's ability to influence the price of a good or service by exercising control over its demand, supply, or both (page 74) |
| monopoly | condition existing when a single company supplies the entire market for a particular good or service (page 74) |
| quantity demanded | the amount of a good or service that buyers are willing and able to purchase at the current price (page 75) |
| law of demand | the law that, all other things being equal, quantity demanded falls when the price rises, and rises when the price falls (page 76) |
| demand schedule | a table that shows the relationship between the price of a good and the quantity demanded (page 76) |
| demand curve | a graph of the relationship between the prices in the demand schedule and the quantity demanded at those prices (page 76) |
| market demand | the sum of all the individual quantities demanded by each buyer in the market at each price (page 77) |
| purchasing power | the value of your income expressed in terms of how much you can afford (page 80) |
| normal good | a good consumers buy more of as income rises, holding other things constant (page 80) |
| inferior good | a good purchased out of necessity rather than choice (page 81) |
| complements | two goods that are used together; when the price of a complementary good rises, the demand for the related good goes down (page 81) |
| substitutes | goods that are used in place of each other; when the price of a the good rises, the quantity demanded of that good falls and the demand for the related good goes up (page 81) |
| quantity supplied | the amount of a good or service that producers are willing and able to sell at the current price (page 85) |
| law of supply | the law that, all other things being equal, the quantity supplied of a good rises when the price of the good rises, and falls when the price of the good falls (page 85) |
| supply schedule | a table that shows the relationship between the price of a good and the quantity supplied (page 85) |
| supply curve | a graph of the relationship between the prices in the supply schedule and the quantity supplied at those prices (page 85) |
| market supply | the sum of the quantities supplied by each seller in the market at each price (page 87) |
| inputs | the resources (labor, land, and capital) used in the production process (page 90) |
| subsidy | a payment made by the government to encourage the consumption or production of a good or service (page 90) |
| equilibrium | condition occurring at the point where the demand curve and the supply curve intersect (page 94) |
| equilibrium price | the price at which the quantity supplied is equal to the quantity demanded; also known as the market-clearing price (page 94) |
| market-clearing price | equilibrium price |
| equilibrium quantity | the amount at which the quantity supplied is equal to the quantity demanded (page 95) |
| law of supply and demand | the law that the market price of any good will adjust to bring the quantity supplied and the quantity demanded into balance (page 95) |
| shortage | market condition when the quantity supplied of a good is less than the quantity demanded; also called excess demand (page 95) |
| excess demand | shortage |
| surplus | market condition when the quantity supplied of a good is greater than the quantity demanded; also called excess supply (page 95) |
| excess supply | surplus |
Created by:
v.virgil
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