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Ch 3-4
Terms needed to learn economics
22
Economics
Undergraduate 1
01/11/2014

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Term
Law of demand
Definition
The principle that there is an inverse relationship between the price of a good and the quantity buyers are willing to purchase in a defined time period, ceteris paribus.
Term
Demand
Definition
A curve or schedule showing the various quantities of product consumers are willing to purchase at possible prices during a specified period of time, ceteris paribus.
Term
Change in quantity demanded
Definition
A movement between points along a stationary demand curve, ceteris paribus.
Term
Change in demand
Definition
An increase or a decrease in the quantity demanded at each possible price. An increase in demand is a rightward shift in the entire demand curve. A decrease in demand is a leftward shift in the entire demand curve.
Term
Normal good
Definition
Any good for which there is a direct relationship between changes in income and its demand curve.
Term
Inferior good
Definition
Any good for which there is an inverse relationship between changes in income and its demand curve.
Term
Substitute good
Definition
A good that competes with another good for consumer purchases. As a result, there is a direct relationship between a price change for one good and the demand for its "competitor" good.
Term
Complementary good
Definition
A good that is jointly consumed with another good.
As a result, that is an inverse relationship between a price change for one good and the demand for its "go together" good.
Term
Law of supply
Definition
The principle that there is a direct relationship between the price of a good and the quantity sellers are willing to offer for sale in a defined time period, ceteris paribus.
Term
Supply
Definition
A curve or schedule showing the various quantities of a product sellers are willing to produce and offer for sale at possible prices during a specified period of time, ceteris paribus.
Term
Change in quantity supplied
Definition
A movement between points along a stationary supply curve, ceteris paribus.
Term
Change in supply
Definition
An increase or a decrease in the quantity supplied at each possible price. An increase in supply is a rightward shift in the entire supply curve. A decrease in supply is a leftward shift in the entire supply curve.
Term
Market
Definition
Any arrangement in which buyers and sellers interact to determine the price and quantity of goods and services exchanged.
Term
Surplus
Definition
A market condition existing at any price where the quantity supplied is greater than the quantity demanded.
Term
Shortage
Definition
A market condition existing at any price at where the quantity supplied is less that the quantity demanded.
Term
Equilibrium
Definition
A market condition that occurs at any price and quantity at which the quantity demanded and the quantity supplied are equal.
Term
Price system
Definition
A mechanism that uses the forces of supply and demand to create and equilibrium through rising and falling prices.
Term
Price ceiling
Definition
A legally establish maximum price a seller can charge.
Term
Price floor
Definition
A legally established minimum price a seller can be paid.
Term
Market failure
Definition
A situation in which a market equlibrium results in too few or too many resources used in the production of a good or service.
This inefficiency may justify government intervention.
Term
Externality
Definition
A cost or benefit imposed on people other than the consumers and producers of a good or service.
Term
Public good
Definition
A good or service two properties:
1. Users collectively consumer benefits
2. There is no way to bar people who do not pay from consuming the good or service.
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