| A | B |
|---|
| Law of Demand | The quantity demanded of a good falls when the price of the good rises |
| Quantity Demanded | The amount of a good that buyers are willing and able to purchase |
| Demand Curve | a graph of the relationship between the price ofa good and the quantity demanded |
| Demand Schedule | a table that shows the relationship between the price of a good and the quantity demanded |
| Demand | An economic principle that describes a consumer's desire and willingness to pay a price for a specific good or service |
| Curve | A line on a graph that shows the relationship between two variables |
| Demand Price | The price of a given quantity at which consumers will demand that quantity |
| Determinants of Demand | The external factors that shift demand to the left or right |
| Consumer Taste | If consumers like a product more based on advertising or experience in using the good, demand will increase |
| Consumer Income | When there is a decrease in income, demand for normal goods decreases. |
| Price of a Substitute Good | If the price of a substitute good increases, this will increase demand for the original good. |
| Price of a Complementary Good | If the price of a complementary good increases, this will decrease demand for the original good. |
| Consumers' Price Expectations | If consumers expect the price to increase, they try to buy more now, before the price rises. |
| Consumers in the Market | If there is a decrease in the number of consumers, this will result in a decrease in demand |
| Normal Goods | A good for which demand increases with an increase in consumer income |
| Inferior Goods | A good for which demand decreases with an increase in consumer income |
| Substitute Goods | Two goods are consumer substitutes if they provide essentially the same utility to the consumer |
| Complementary Goods | Two goods that provide more utility when consumed together than when consumed separately |
| Law of Supply | When the price of a good rises, the quantity supplied of that good rises. |
| Supply Schedule | A table showing quantity supplied for a good at various prices |
| Supply Curve | Shows the quantity of a good supplied at all prices |
| Quantity Supplied | The amount of a good that sellers are willing and able to sell |
| Supply | A fundamental economic concept that describes the total amount of a specific good or service that is available to consumers. |
| Determinants of Supply | The external factors that shift supply to the left or right. |
| Cost of Factors of Production | If the prices of resources used to produce a product increase, supply will decrease. |
| Profit Opportunities Producing Other Product | If profit opportunities producing other things decrease, more sellers will begin producing this product, increasing supply |
| Producers' Price Expectations | producers' expectations about the future price of the product they sell influence current supply |
| Sellers in the Market | More sellers in the market will usually increase supply |
| Government Policy | Government decides to increase taxes, decreases supply. |
| Market Equilibrium | It is the only quantity where the price consumers are willing to pay is exactly the price producers are willing to accept |
| Shortage | A situation in which, at the going market price, the quantity demanded exceeds the quantity supplied |
| Disequilibirium | Any price where the quantity demanded does not equal the quantity supplied |
| Surplus | A situation in which, at the going market price, the quantity supplied exceeds quantity demanded |
| Elasticity | Measures the sensitivity, or responsiveness, of a choice to a change in an external factor |
| Price Elasticity of Demand | Measures the sensitivity of consumers' quantity demanded for good X when the price of good X changes |
| Midpoint Formula | ((Q2-Q1)/(Q2+Q1)/2)/((P2-P1)/(P2+P1)/2) |
| Price Elastic Demand | % change in Quantity Demanded is greater than % change in Price |
| Price Inelastic Demand | % change in Quantity Demanded is less than % change in Price |
| Unit Elastic | Elasticity of Demand equals 1 |
| Perfectly Elastic | The demand curve is horizontal, meaning consumers have an instantaneous and infinite response to a change in price |
| Perfectly Inelastic | The demand curve is vertical, and there is absolutely no response to a change in price |
| Determinants of Elasticity | Substitutes, Proportion of Income, Time Horizon, Need versus Want |
| Total Revenue | The price of a good multiplied by the quantity of that good sold |
| Total Revenue Test | Total revenue rises with a price increase if demand is price inelastic and falls with a price increase if demand is price elastic |
| Income Elasticity | A measure of how sensitive the consumption of a good is to a change in consumers' income |
| Luxury | A good for which the proportional increase in consumption is greater than the proportional increase in income |
| Necessity | A good for which the proportional increase in consumption is less than the proportional increase in income |
| Income Elasticity and Normal | Positive and Direct Relationship |
| Income Elasticity and Inferior | Negative and Inverse Relationship |
| Cross Price Elasticity and Positive | Substitutes |
| Cross Price Elasticity and Negative | Complements |
| Cross Price Elasticity | A measure of how sensitive the consumption of good X is to a change in the price of good Y |
| Price Elasticity of Supply | Measures the sensitivity of producers' quantity supplied for good X when the price of good X changes |
