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OpenStax Ch3
Supply & Demand
| Term | Definition |
|---|---|
| Ceteris Paribus | Other things being equal or constant |
| Complements | Goods that are often used together so that consumption of one good tends to enhance consumption of the other |
| Consumer Surplus | The extra benefit consumers receive from buying a good or service, measured by what the individuals would have been willing to pay, minus the amount that they actually paid |
| Deadweight Loss | The loss of social surplus that occurs when a market produces an inefficient quantity |
| Demand | The relationship between price and quantity demanded of a certain good or service |
| Demand Curve | A graphic representation of the relationship between price and quantity demanded of a certain good or service, with quantity on the horizontal axis and the price on the vertical axis |
| Demand Schedule | A table that shows a range of prices for a certain good or service and the quantity demanded at each price |
| Social Surplus | The total or sum surplus of consumers and producers |
| Equilibrium | The SITUATION where quantity demanded is equal to the quantity supplied; no surplus or shortage |
| Equilibrium Price | The PRICE where quantity demanded is equal to quantity supplied |
| Equilibrium Quantity | The QUANTITY at which quantity demanded and quantity supplied are equal for a certain price level |
| Excess Demand | At the existing price, the quantity demanded exceeds the quantity supplied; shortage |
| Excess Supply | At the existing price, quantity supplied exceeds the quantity demanded; surplus |
| Factors of Production | The resources such as labor, materials, and machinery that are used to produce goods and services; inputs |
| Inferior Good | A good in which the quantity demanded falls as income rises, and in which quantity demanded rises and income falls |
| Law of Demand | Common relationship that a higher price leads to a lower quantity demanded of a certain good or service and a lower price leads to a higher quantity demanded, while all other variables are held constant |
| Law of Supply | The common relationship that a higher price leads to a greater quantity supplied and a lower price leads to a lower quantity supplied, while all other variables are held constant |
| Normal Good | A good in which the quantity demanded rises as incomes rises, and in which quantity demanded falls as income falls |
| Price | What a buyer pays for a unit of the specific good or service |
| Price Ceiling | A legal maximum price that a producer must have |
| Price Control | Government laws to regulate prices instead of letting market forces determine prices |
| Price Floor | A legal minimum price that a producer must have |
| Producer Surplus | The extra benefit producers receive from selling a good or service, measured by the price the producer actually received, minus the price the producer would have been willing to accept |
| Quantity Demanded | The TOTAL number of unit a good or service consumers are willing to purchase at a given price |
| Quantity Supplied | The TOTAL number of units of a good or service producers are willing to sell at a given price |
| Shift in Demand | When a change in some economic factor (ASIDE FROM PRICE) causes a different quantity to be demanded at every price |
| Shift in Supply | When a change in some economic factor (ASIDE FROM PRICE) causes a different quantity to be supplied at every price |
| Supply | Relationship between price and the quantity supplied of a certain good or service |
| Supply Curve | A line that shows the relationship between price and quantity supplied on a graph, with quantity supplied on the horizontal axis and price on the vertical axis |
| Supply Schedule | A table that shows a range of prices for a good or service and the quantity supplied at each price |
| Substitute | A good that can replace another to an extent, so that greater consumption of one good can mean less of the other |
| Movement | Change in demand caused by a change in price while all other factors remain constant |
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