Term
| perfectly competitive market |
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Definition
| (1) many buyers and sellers, (2) all firms selling identical products, and (3) no barriers to new firms entering the market. |
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| the demand by all the consumers of a given good or service. |
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| A table that shows the relationship between the price of a product and the quantity of the product demanded |
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| A curve that shows the relationship between the price of a product and the quantity of the product demanded |
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| Ceteris paribus (“all else equal”) condition |
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Definition
| The requirement that when analyzing the relationship between two variables—such as price and quantity demanded—other variables must be held constant. |
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| The amount of a good or service that a consumer is willing and able to purchase at a given price. |
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| A rule that states 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. |
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| The change in the quantity demanded of a good that results from a change in price, making the good more or less expensive relative to other goods that are substitutes. |
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| The change in the quantity demanded of a good that results from the effect of a change in the good’s price on a consumers’ purchasing power. |
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| When the price of a good falls, two effects take place: |
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Definition
Consumers substitute toward the good whose price has fallen.
Consumers have more purchasing power, which is like an increase in income. |
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Goods for which the demand increases as income rises and decreases as income falls.
Examples: Clothing
Restaurant meals
Vacations |
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Definition
Goods for which the demand increases as income falls and decreases as income rises.
Examples: Second-hand clothing
Ramen noodles |
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Definition
Goods and services that can be used for the same purpose.
Examples: Big Mac and Whopper
Ford F-150 and Dodge Ram
Jeans and Khakis |
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Definition
Goods and services that are used together.
Examples: Big Mac and McDonald’s fries
Hot dogs and hot dog buns
Left shoes and right shoes |
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| The characteristics of a population with respect to age, race, and gender. |
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| A table that shows the relationship between the price of a product and the quantity of the product supplied. |
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| A curve that shows the relationship between the price of a product and the quantity of the product supplied. |
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| The amount of a good or service that a firm is willing and able to supply at a given price. |
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| 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. |
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| A firm may experience a positive or negative change in its ability to produce a given level of output with a given quantity of inputs |
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Definition
| a situation in which quantity demanded equals quantity supplied. |
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Term
| competitive market equilibrium |
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Definition
| Recall that markets with many buyers and sellers are perfectly competitive markets; a market equilibrium in one of these markets is called a competitive market equilibrium. |
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| a situation in which quantity supplied is greater than quantity demanded |
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| a situation in which quantity demanded is greater than quantity supplied |
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Definition
| sellers will realize they can increase the price and still sell as many smartphones, so the price will rise. |
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