Economics /Eco 201 Chapter 3: Demand and Supply Concepts
A schedule or a curve that shows the various amounts of a product that consumers are willing and able to purchase at each of a series of possible prices during a specified period of time.
Demand
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Key Terms
Term
Definition
A schedule or a curve that shows the various amounts of a product that consumers are willing and able to purchase at each of a series of possible prices during a specified period of time.
Demand
The inverse relationship between price and quantity demand
Law of demand
Successive units of a particular product yield less and less satisfaction.
Diminishing marginal utility
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A lower price increases the purchasing power of a buyer's money income
Income effect
At a lower price buyers have the incentive to substitute what is now a less expensive product for other products that are now relatively more expensive.
Substitution effect
Factors other than price that can and do affect purchases
Determinants of demand
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| Term | Definition |
|---|---|
A schedule or a curve that shows the various amounts of a product that consumers are willing and able to purchase at each of a series of possible prices during a specified period of time. | Demand |
The inverse relationship between price and quantity demand | Law of demand |
Successive units of a particular product yield less and less satisfaction. | Diminishing marginal utility |
A lower price increases the purchasing power of a buyer's money income | Income effect |
At a lower price buyers have the incentive to substitute what is now a less expensive product for other products that are now relatively more expensive. | Substitution effect |
Factors other than price that can and do affect purchases | Determinants of demand |
What are the 5 determinants of demand? | 1. Consumers' tastes
2. The number of buyers in the market
3. Consumers' incomes
4. The prices of related goods
5. Consumer expectations |
Products whose demand varies directly with money income; superior goods | Normal goods |
Goods whose demand varies inversely with money income | Inferior goods |
A good that can be used in place of another good | Substitute good |
A good that is used together with another good | Complementary good |
A shift of the demand curve to the right (increase) or to the left (decrease). | Change in demand |
A movement from one point to another point, from one price-quantity combo to another | Change in quantity-demand |
A schedule or curve showing the various amounts of a product that producers are willing and able to make available for sale at each of a series of possible prices during a specific period. | Supply |
The direct relationship between price and quantity supplied | Law of supply |
The factors other than price that can and do impact supply | Determinants of supply |
What are the basic 6 determinants of supply? | 1. Resource prices
2. Technology
3. Taxes and subsidies
4. Prices of other goods
5. Producer expectations
6. The number of sellers in the market |
A shift in the supply curve to the left (increase) or the right (decrease) | Change in supply |
Movement from one point to another, from one price-quantity supplied combo to another. | Change in quantity supplied |
Where the intentions of buyers and sellers match.
Where the demand curve meets the supply curve | Equilibrium price |
The quantity at which the intentions of buyers and sellers match.
Where the demand curve meets the supply curve | Equilibrium quantity |
Created by an above-equilibrium price, quantity supplied exceeds quantity demanded | Surplus |
Created by a below-equilibrium price, quantity supplied is less than quantity demanded | Shortage |
The production of any particular good in the least costly way | Productive efficiency |
The particular mix of goods and services most highly valued by society | Allocative efficiency |
Sets the maximum legal price a seller may charge for a product or service. Can lead to a shortage. | Price ceiling |
Sets the minimum legal price a seller may charge for a product or service. Can lead to a surplus. | Price floor |