Term
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Definition
| The market for any good consists of all buyers, or sellers of that good |
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Definition
| A schedule or graph showing the quantity of a good that buyers wish to buy at each price |
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Definition
| The change in the quantity demanded of a good that results because buyers switch to or from substitutes when the price of the good changes |
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Definition
| The change in the quantity demanded of a good that results because a change in the price of a good changes the buyer's purchasing power |
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| Buyer's Reservation Price |
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Definition
| The largest dollar amount the buyer would be willing to pay for a good |
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Definition
| A graph or schedule showing the quantity of a good that sellers wish to sell at each price |
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| Seller's Reservation Price |
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Definition
| The smallest dollar amount for which a seller would be willing to sell an additional unit, generally equal to marginal cost |
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Definition
| A system is in equilibrium when there is no tendency for it to change |
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| Equilibrium Price & Equilibrium Quantity |
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Definition
| The values of price and quantity for which quantity supplied and quantity demanded are equal |
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Definition
| Occurs in a market when all buyers and sellers are satisfied with their respective quantities at the market price |
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Definition
| The amount by which quantity supplied exceeds quantity demanded when the price of a good exceeds the equilibrium price |
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Term
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Definition
| The amount by which quantity demanded exceeds quantity supplied when the price of a good lies below the equilibrium price |
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Definition
| A maximum allowable price, specified by law |
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Term
| Change in the Quantity Demanded |
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Definition
| A movement along the demand curve that occurs in response to a change in price |
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Term
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Definition
| A shift of the entire demand curve |
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Definition
| A shift of the entire supply curve |
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| Change in the Quantity Supplied |
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Definition
| A movement along the supply curve that occurs in response to a change in price |
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Term
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Definition
| Two goods are complements in consumption if an increase in the price of one causes a leftward shift in the demand curve for the other (or if a decrease causes a rightward shift) |
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Definition
| Two goods are substitutes in consumption if an increase in the price of one causes a rightward shift in the demand curve for the other (or if a decrease causes a leftward shift) |
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Term
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Definition
| One whose demand curve shifts rightward when the incomes of buyers increase and leftward when they incomes of buyers decrease |
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Term
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Definition
| One whose demand curve shifts leftward when the incomes of buyers increase and rightward when the incomes of buyers decrease |
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Definition
| The difference between the buyer's reservation price and the price he or she actually pays |
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Definition
| The difference between the price received by the seller and his or her reservation price |
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Definition
| The difference between the buyer's reservation price and the seller's reservation price |
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Term
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Definition
| Economic metaphor for unexploited gains from exchange |
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Term
| Socially Optimal Quantity |
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Definition
| The quantity of a good that results in the maximum possible economic surplus from producing and consuming the good |
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Term
Efficiency
(a.k.a. Economic Efficiency |
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Definition
| Occurs when all goods and services are produced and consumed at their respective socially optimal levels |
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