| A | B |
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| demand | the amount of a good or service that consumers are able and willing to buy at various possible prices during a specified time period |
| supply | the amount of a good or service that producers are able and willing to sell at various prices during a specified time period |
| market | the process of freely exchanging goods and services between buyers and sellers |
| Law of Demand | as price goes up, quantity demanded goes down. As price goes down, quantity demanded goes up |
| Quantity Demanded | the amount of a good or service that a consumer is willing and able to purchase at a specific price |
| Real Income Effect | economic rule stating that individuals cannot keep buying the same quantity of a product if its price rises while their income stays the same |
| Substitution Effect | economic rule stating that if two items satisfy the same need and the price of one rises, people will buy the other |
| utility | the ability of any good or service to satisfy consumer wants |
| marginal utility | additional amount of satisfaction |
| Law of diminishing marginal utility | rule stating that the additional satisfaction a consumer gets from purchasing one more unit of a product will lessen with each additional unit purchased |
| demand curve | downward-sloping line that shows in graph form the quantities demanded at each possible price |
| complementary good | product often used with another product |
| Elasticity | economic concept dealing with consumers’ responsiveness to an increase or decrease in price of a product |
| Price Elasticity of Demand | economic concept that deals with how much demand varies according to changes in price |
| Elastic Demand | situation in which the rise or fall in a product’s price greatly affects the amount that people are willing to buy |
| Inelastic Demand | situation in which a product’s price change has little impact on the quantity demanded by consumers |
| law of supply | economic rule stating that the price and quantity supplied move in the same direction |
| quantity supplied | the amount of a good or service that a producer is willing and able to supply at a specific price |
| supply curve | upward-sloping line that shows in graph form the quantities supplied at each possible price |
| Law of diminishing returns | economic rule that says as more units of a factor of production (such as labor) are added to other factors of production (such as equipment), after some point total output continues to increase but at diminishing rate |
| Equilibrium Price | the price at which the amount producers are willing to supply is equal to the amount consumers are willing to buy |
| shortage | situation in which the quantity demanded is greater than the quantity supplied at the current price |
| surplus | situation in which quantity supplied is greater than quantity demanded at the current price |
| price ceiling | a legal maximum price that may be charged for a particular good or service |
| rationing | the distribution of goods or services based on something other than price |
| black market | “underground” or illegal market in which goods are traded at prices above their legal maximum prices or in which illegal goods are sold |
| price floor | a legal minimum price below which a good or service may not be sold |
| Supply Schedule | table showing quantities supplied at different possible prices |
