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Chapters 4-6
Intro Supply and Demand
44
Economics
Undergraduate 1
02/21/2008

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Term
demand
Definition
a relationship btw. price and the quantity demanded of a certain good or service.
Term
quantity demanded
Definition

the total number of units of a good or service purchased at a certain price

Term
law of demand
Definition
the common relationship that a higher price leads to a lower quantity demanded of a certain good or service
Term
demand schedule
Definition
a table that shows a range of prices for a certain good or service and the quantity demanded at each price
Term
demand curve
Definition
a line that shows the relationship btw. price and quantity demanded of a certain good or service on a graph, with quantity on the horizontal axis and the price on the vertical axis
Term
supply
Definition
a relationship btw. price and the quantity supplied of a certain good or service
Term
quantity supplied
Definition
the total number of units of a good or service sold at a certain price
Term
law of supply
Definition
the common relationship that a higher price is associated with a greater quantity supplied at each price
Term
supply schedule
Definition
a table that shows a range of prices for a good or service and the quantity supplied at each price.
Term
supply curve
Definition
a line that shows the relationship btw. price and quantity supplied on a graph, w/ quantity suppled on the horizontal axis and price on the vertical axis
Term
equilibrium price
Definition
the price where quantity demanded is equal to quantity supplied
Term
equilibrium quanity
Definition
the quantity at which quantity demanded and quantity supplied are equal at a certain price
Term
equilibrium
Definition
the combination of price and quanitity where there is no economic pressure from surpluses or shortages that would cause price or quantity to shift
Term
excess supply/surplus
Definition
when at the existing price, quantity suppled exceeds the quantity demanded
Term
excess demand/shortage
Definition
at the existing price, the quantity demanded exceeds the quantity supplied
Term
ceteris paribus
Definition
all other things being equal
Term
shift in demand
Definition
when a change in some economic factor related to demand causes a different quantity to be demanded at every price
Term
normal goods
Definition
goods where the quantity demanded rises as income rises
Term
inferior goods
Definition
goods where the quantity demanded falls as income rises
Term
substitutes
Definition
goods that can replace each other to some extent, so that greater consumption of one good can mean less of the other
Term
complements
Definition
goods that are often used together, so that consumption of one good tends to increase consumption of the other
Term
shift in supply
Definition
when a change in some economic factor related to supply causes a quantity to be supplied at every price
Term
factors that increase demand
Definition
a)taste shift to greater popularity
b)population likely to buy rises
c)income rises(for a normal good)
d)price of substitutes rises
e)price of complements falls
f)future expectations encourage buying
Term
factors that decrease demand
Definition
a) taste shift to lesser popularity
b) population likely to buy drops
c) income drops(for a normal good)
d) price of substitutes falls
e) price of complements rises
f) future expectations discourage buying
Term
factors that increase supply
Definition
a)favorable natural conditions for productions
b)fall in input prices
c) improved technology
d) lower product taxes/less costly regulations
Term
factors that decrease supply
Definition
a) poor natural conditions for production
b) a rise in input prices
c) a decline in technology
d) higher product taxes/more costly regulations
Term
price controls
Definition
govt laws to regulate prices
Term
price ceiling
Definition
a law that prevents a price form rising above a certain level
Term
price floor
Definition
a law that prevent a price from falling below a certain level
Term
black market
Definition
an illegal market that breaks govt rules on prices or sales
Term
consumer surplus
Definition
the benefit consumers receive from buying a good or service, measured by what the individuals woul d have been willing to pay minus the amount that they actually paid
Term
producer surplus
Definition
the benefit producers receive from selling a good or service, measure by the price producer s actually received minus the price the producer would have been willing to accept
Term
social surplus
Definition
the sum of a consumer surplus and producer surplus
Term
dead weight loss
Definition
the loss in social surplus that occurs when a market produces an inefficient quantity
Term
minimum wage
Definition
a price floor that makes it illegal for an emplyer to pay employees less than a certain hourly rate
Term
usury laws
Definition
laws that impose an upper limit on the interest rate that lenders can charge
Term
protectionism
Definition
govt policies to reduce or block imports
Term
tariffs
Definition
taxes imposed on imported products
Term
import quotas
Definition
numerical limitations on the quantity of products that can be imported
Term
nontarrif barriers
Definition
all the other ways a nation can draw up rules, regulations, inspections and paperwork to make it more costly or difficult to import products
Term
infant industry argument
Definition
an argument to block imports for a short time, to give the infant industry time to mature before eventually it starts competing on equal terms in the global economy
Term
dumping
Definition
selling internationally traded goods below their cost of production
Term
anti dumping laws
Definition
laws that block imports sold below the cost of production and impose tariffs that would increase the price of these imports to reflect their cost of production
Term
race to the bottom
Definition
when production locates in countries with the lowest environmental standards, putting pressure on all countries to reduce their environmental standards
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