Chapter 3 Word Scramble
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| Term | Definition |
| Competitive Market | -many buyers and sellers -same good or service |
| Supply and Demand Model | model of how competitive a market works/5 key elements: demand curve, supply curve, demand and supply curve shifts, market equilibrium, changes in market equilibrium |
| Demand Schedule | table that shows how much of a good or service consumers will buy at different prices |
| Law of Demand | negative relationship btw the quantity demanded and the price - quantity demanded increases as price decreases -bc of this demand curve is downward sloping |
| Increase in Demand | the quantity demanded rises for any given price/increase in pop. generates this (know the difference btw demand-broad and quantity demanded-specific quantity associated with specific price) |
| Movement along the demand curve | change in the quantity demanded of a good that is the result of a change in that good's price (different from the shift in a demand curve) |
| Substitutes | two goods are substitutes if a fall in the price of one of the goods makes consumers less willing to buy the other good |
| Complements | two goods are complements if a fall in the price of one good makes people more willing to buy the other good |
| Normal Goods | when a rise in income increases the demand for a good (normal case) it is a normal good |
| Inferior Goods | when a rise in income decreases the demand for a good |
| Market Demand Curve | the horizontal sum of the individual demand curves of all consumers in that market |
| A decrease in the price of a good will result in: | increase in the quantity demanded |
| If the demand for tires goes down when the price of gas goes up, then tires and gas are: | complements |
| Supply Schedule | table that shows how much of a good or service producers will supply at different prices - as price falls, the quantity supplied falls |
| Supply Curve | graphically shows how much of a good or service producers are willing to sell at any given price - typically upward sloping |
| Increase in Supply | a greater quantity is supplied for any given price - a shift is a change in the quantity supplied of a good at any given price |
| Movement along the supply curve | change in the quantity supplied of a good that is the result of a change in that good's price (different from shift) |
| Decrease in Supply | leftward shift of the supply curve: at any given price there is a decrease in the quantity supplied |
| Input | a good that is used to produce another good ex; labor, machinery, raw materials |
| What causes a Supply Curve to Shift? | -Changes in input -Changes in the prices of related goods and services -Changes in technology -Changes in expectations -Changes in the number of producers |
| Market Supply Curve | horizontal sum of the individual supply curves of all firms in that market |
| If the price of a commodity increases, you can expect the: | quantity supplied to increase |
| A leftward shift of a supply curve could be caused by: | an increase in the cost of an input |
| Equilibrium in a competitive market: | when the quantity demanded of a good equals the quantity supplied of that good |
| Equilibrium price (AKA market-clearing price) | the price at which the competitive market is at equilibrium -every buyer finds a seller and vice versa |
| Equilibrium quantity | quantity of the good bought and sold at that price |
| Market Equilibrium | occurs where the supply curve and demand curve intersect -equilibrium price is shown on y-axis -equilibrium quantity is shown on the x-axis |
| Surplus | exists when the quantity supplied exceeds the quantity demanded/occurs when the price is above its equilibrium level |
| Shortage | exists when the quantity supplied falls short of the quantity demanded/occurs when the price is below its equilibrium level |
| Equilibrium and Shifts of the Demand Curve: | -Increase in demand: leads to movement along supply curve due to a higher equilibrium price and higher equilibrium quantity -Decrease in supply: leads to a movement along the demand curve due to a higher equilibrium price and lower equilibrium quantity |
| Technology Shifts of the Supply Curve | -Increase in Supply Curve: leads to a movement along the demand curve to a lower equilibrium price and higher equilibrium quantity |
| Simultaneous Shifts of Supply and Demand (small decrease in supply) | Small decrease in supply-supply shift to left Large increase in demand-demand shifts to right -The increase in demand dominates the decrease in supply |
| Simultaneous Shifts of Supply and Demand (large decrease in supply) | Large decrease in supply- supply shifts left leads to small decrease in demand (demand shifts right) -the decrease in supply dominates the increase in demand |
| Equilibrium and Shifts of the Supply Curve | decrease in supply leads to a movement along the demand curve due to a higher equilibrium price and lower equilibrium quantity |
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