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Economics Ch. 7

Economics Chapter 7

Demand The amount of goods and services that the consumers are able and willing to buy at a possible price.
Supply The amount of goods and services that producers are able and willing to sell at various prices.
Voluntary exchange A transaction in which a buyer and seller exercise their economic freedom by working out their own terms/
Law of demand Economic rule stating that the quantity demand and price moved into opposite directions.
Quantity demanded The amount of goods or services that consumer is willing and able to purchase at a specific price.
Real income effect Economic rule stating individuals cannot keep buying the quantity of products if the price rises.
Subsitution effect Economic rule stating that if two items satisfy the same need and the price of one rises, people will buy more of others.
Utility The ability of any good or service that satisfies the consumers wants.
Marginal utility An additional amount of satisfaction.
Law of diminishing marginal utility Rules stating that the additional satisfaction gets from purchasing one more unit of a product will lessen with each additional unit.
Demand schedule Table showing qualities, demand at different possible prices.
Demand curve Downward sloping line that shows in graph form the quality demand at each possible price.
Elasticity Economic concept dealing with consumers responsiveness to an increase or decrease in the price of a product.
Price elasticity of demand Economic concept that deals with how much demand varies according to change in prices.
Elastic demand Situation in which a given rise of full in a products price greatly effects the amount that people are willing to buy.
Law of supply Economic rule stating that price and quantity supplied more in the same direction.
Quantity supplied Amount of a good or service that a producer is willing and able to supply at a specific price.
Supply schedule Table showing quantities supplied at different possible prices.
Supply curve Upward sloping line that shows in graphs form the quantities supplied at each possible price.
Technology The use of science to develop new products and new methods for producing and distributing goods and services.
Law of diminishing returns Economic rule that says as more units of a factor of production are added to other factors of production after some points total output continues to decrease.
Equilibrium price The price at which the amount producers are willing to supply is equal to the amount consumers are willing to buy.
Shortage Situation in which the quantity demand is greater than the quantity supplied at the current price.
Surplus situation in which quantity supplied is greater than quantity demanded at current price.
Price ceiling A legal maximum price that may be charged for a particular good or service.
Rationing The distribution of goods and series based on something other than the price.
Black Market Underground or illegal market in which goods are traded at prices above their legal maximum price or in which illegal goods are sold.
Price floor A legal minimum price below which a good or service may not be sold.