# Shared Flashcard Set

## Details

Principles of Microeconomics- Chp. 4
06E:001 U of Iowa Book: Principles of Microeconomics 4th Edition By: N. Gregory Mankiw
29
Economics
01/28/2011

Term
 Market
Definition
 a group of buyers and sellers of a particular good or service -buyers determine demand -sellers determine supply -can be organized or unorganized
Term
 Competitive Market
Definition
 a market in which there are many buyers and many sellers so that each has a negligible impact on the market price
Term
 Perfectly Competitive
Definition
 (assume in this chapter) 1) the goods offered for sale are all exactly the same 2) the buyers and sellers are so numerous that no single buyer or seller has any influence over the market price
Term
 Price Takers
Definition
 buyers and sellers in perfectly competitive markets who accept the price the market determines
Term
 Monopoly
Definition
 a market with only one seller who sets the price
Term
 Quantity Demanded
Definition
 the amount of a good that buyers are willing and able to purchase -negatively related to price (price of good goes up, demand goes down--price of good goes down, demand goes up)
Term
 Law of Demand
Definition
 the claim that, other things equal, the quantity demanded of a good falls when the price of the good rises
Term
 Demand Schedule
Definition
 a table that shows the relationship between the price of a good and the quantity demanded
Term
 Demand Curve
Definition
 a graph of the relationship between the price of a good and the quantity demanded
Term
 Market Demand
Definition
 the sum of all the individual demands for a particular good or service
Term
 Increase in Demand
Definition
 any change that increases the quantity demanded at every price; shifts the demand curve to the right
Term
 Decrease in Demand
Definition
 any change that reduces the quantity demanded at every price; shifts the demand curve to the left
Term
 Normal Good
Definition
 a good for which, other things equal, an increase in income leads to an increase in demand
Term
 Inferior Good
Definition
 a good for which, other things equal, an increase in income leads to a decrease in demand
Term
 Substitutes
Definition
 two goods for which an increase in the price of one leads to an increase in the demand for the other
Term
 Complements
Definition
 two goods for which an increase in the price of one leads to a decrease in the demand for the other
Term
 Quantity Supplied
Definition
 the amount of a good that sellers are willing and able to sell -positively related to price (price of goods goes up, supply of goods goes down-price of goods goes down, supply of goods goes down)
Term
 Law of Supply
Definition
 the claim that, other things equal, the quantity supplied of a good rises when the price of the good rises
Term
 Supply Schedule
Definition
 a table that shows the relationship between the price of a good and the quantity supplied
Term
 Supply Curve
Definition
 a graph of the relationship between the price of a good and the quantity supplied
Term
 Market Supply
Definition
 sum of the supplies of all sellers
Term
 Increase in Supply
Definition
 any change that raises quantity supplied at every price; shifts the supply curve to the right
Term
 Decrease in Supply
Definition
 any change that reduces the quantity supplied at every price; shifts the supply curve to the left
Term
 Equilibrium
Definition
 a situation in which the market price has reached the level at which quantity supplied equals quantity demanded
Term
 Equilibrium Price (Market Clearing Price)
Definition
 the price that balances quantity supplied and quantity demanded
Term
 Equilibrium Quantity
Definition
 the quantity supplied and the quantity demanded at the equilibrium price
Term
 Surplus (Excess Supply)
Definition
 a situation in which quantity supplied is greater than quantity demanded
Term
 Shortage (Excess Demand)
Definition
 a situation in which quantity demanded is greater than quantity supplied
Term
 Law of Supply and Demand
Definition
 the claim that the price of any good adjusts to bring the quantity supplied and the quantity demanded for that good into balance
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