Principles of Macroeconomics: Chapter 4
A relationship between price and the quantity demanded of a certain good or service.
The total number of units of a good or service purchased at a certain price.
Law of demand
The common relationship that a higher price leads to a lower quantity demanded of a certain good or service.
A table that shows a range of prices for a certain good or service and the quantity demanded at each price.
A line that shows the relationship between price and quantity demanded of a certain good or service on a graph, with quantity on the horizontal axis and price on the vertical axis.
A relationship between price and the quantity supplied of a certain good or service.
The total number of units of a good or service sold at a certain price.
Law of supply
The common relationship that a higher price is associated with a greater quantity supplied.
A table that shows a range of prices for a good or service and the quantity supplied at each price.
A line that shows the relationship between price and quantity supplied on a graph, with the quantity supplied on the horizontal axis and the price on the vertical axis.
The price where quantity demanded is equal to quantity supplied.
The quantity at which quantity demanded and quantity supplied are equal at a certain price.
The combination of price and quantity where there is no economic pressure from surpluses or shortages that would cause price or quantity to shift.
When at the existing price, quantity supplied exceeds quantity demanded; also called a “surplus”.
At the existing price, the quantity demanded exceeds the quantity supplied.
Other things being equal.
Shift in demand
When a change in some economic factor related to demand causes a different quantity to be demanded at every price.
Goods where the quantity demanded rises as income rises.
Goods where the quantity demanded falls as the income rises.
Goods that can replace each other to some extent, so that greater consumption of one good can mean less of another.
Goods that are often used together, so that consumption of one good tends to increase consumption of the other.
Shift in supply
When a change in some economic factor related to supply causes a quantity to be supplied at every price.
Government laws to regulate prices.
A law that prevents a price from rising above a certain level.
A law that prevents a price from falling below a certain level.
An illegal market that breaks government rules on prices or sales.
The benefit consumers receive from buying a good or service, measured by what the individuals would have been willing to pay minus the amount that they actually paid.
The benefit consumers receive from selling a good or service, measured by the price the producer actually received minus the price the producer would have been willing to accept.
The sum of consumer surplus and producer surplus.
The loss in social surplus that occurs when a market produces and inefficient quantity.