| Definition | Term |
| five most important variables that shift market supply | • Prices of inputs
• Technological change
• Prices of substitutes in production
• Number of firms in the market
• Expected future prices |
| Goods and services that can be used for the same purpose. | Substitutes |
| is the difference between the highest price a consumer is willing to pay for a good or service and the actual price the consumer receives. | Consumer surplus |
| The law of supply: causes the entire supply curve to shift. | change in supply |
| five most important Variables That Shift Market Demand | • Income
• Prices of related goods
• Tastes
• Population and demographics
• Expected future prices |
| the additional cost to a firm of producing one more unit of a good or service. | Marginal cost |
| Goods for which the demand increases as income rises, and decreases as income falls. | Normal goods |
| An increase in the price of an input decreases the profitability of selling the good, causing a _______ __ _________ | decrease in supply |
| The law of supply A shift to the right is | increase in supply |
| shifting the curve caused by | other changes |
| A curve that shows the relationship between the price of a product and the quantity of the product supplied. | Supply Curve |
| A curve that shows the relationship between the price of a product and the quantity of the product demanded. | Demand Curve |
| The rule that, holding everything else constant, when the price of a product falls, the quantity demanded of the product will increase, and when the price of a product rises, the quantity demanded of the product will decrease. | Law of Demand |
| The reduction in economic surplus resulting from a market not being in competitive equilibrium is known as | deadweight loss |
| A table that shows the relationship between the price of a product and the quantity of the product supplied. | Supply Schedule |
| Increase in price of related good increases demand if products are substitutes, decreases demand if products are complements | Prices of related goods |
| A decrease in the price of an input increases the profitability of selling the good, causing an _______ ___ ________ | increase in supply |
| Goods and services that are consumed together. | Complements |
| A table that shows the relationship between the price of a product and the quantity of the product demanded. | Demand Schedule |
| are things used in the production of a good or service. | Inputs |
| changes in ________ and/or _________ will affect the price and quantity traded. | supply, demand |
| An expected increase in the price tomorrow ___________ today. | increases demand |
| The law of supply A shift to the left is | decrease in supply |
| movement along the curve caused by | price change |
| A change in the price of the product being examined causes a movement along the supply curve. | change in quantity supplied. |
| is the difference between the lowest price a firm would be willing to accept for a good or service and the price it actually receives. | Producer surplus |
| A steep demand curve means that buyers ______________ how much they buy when the price changes; this results in them_____________ | do not change, taking on much of the burden of the tax. |
| Future products are_________ for current products | substitutes |
| The law of demand A shift to the right is | increase in demand |
| A legally determined maximum price that sellers can charge. | Price ceiling |
| If the demand curve were shallower buyers,__________ how much they buy when the price changes. Then they________ | would change , could not be forced to accept as much of the burden of the tax. |
| The law of demand A shift to the left is | decrease in demand |
| An expected decrease in the price tomorrow____________ today. | decreases demand |
| a situation in which quantity demanded equals quantity supplied. | market equilibrium |
| the actual division of the burden of a tax between buyers and sellers in a market. | tax incidence |
| a market in which buying and selling take place at prices that violate government price regulations. | black market |
| Price is determined by the __________ of buyers and sellers. | interaction |
| A legally determined minimum price that sellers may receive. | Price floor |
| Goods for which the demand decreases as income rises, and increases as income falls. | Inferior goods |
| Increase in income increases demand if product is normal, decreases demand if product is inferior. | Income of consumers |
| The requirement that when analyzing the relationship between two variables—such as price and quantity demanded—other variables must be held constant. | Ceteris paribus (“all else equal”) condition |
| The rule that, holding everything else constant, increases in price cause increases in the quantity supplied, and decreases in price cause decreases in the quantity supplied. | The law of supply |
