| A | B |
|---|
| firm | An organization that transforms resources (inputs) into products (outputs). Firms are primary producing units in a market economy. |
| entrepreneur | A person who organizes, manages, and assumes the risks of a firm, taking a new idea or a new product and turning it into a successful business. |
| households | The consiming units of an economy. |
| product or output markets | The market in which godds and services are exchanged. |
| input or factor markets | The market in which the resources used to produce products are exchanged. |
| labor market | The input/factor market in which households supply work for wages to firms that demand labor. |
| capital market | The input/factor market in which households supply their savings, for interest or for claims to future profits, to firms that demand funds in order to buy capital goods. |
| land market | Tne input/factor market in which households supply land or other real property in exchange for rent. |
| factors of production | The inputs into the production process. Land, labor, and capital are the three factors of production. |
| quantity demanded | The amount (nimber of units) of a product that a household would buy in a given period if it could buy all it wanted at the current market price. |
| demand schedule | A table showing how much of a given product a household would be willing to buy at differnt prices. |
| demand curve | A graph illustrating how much of a given product a household would be willing to buy at different prices. |
| law of demand | The negative relationship betwwen price and quantity demanded: As price rises, quantity demanded decreases. As price falls, quantity demanded increases. |
| income | The sum of all a household's wages, salaries, profits, interest payments, rents, and other forms of earnings in a given period of time. It is a flow measure. |
| wealth or net worth | the total value of what a household minus what it owes. It is a stock measure. |
| normal goods | Goods for which demand goes up when income is higher and for which demand goes down when income is lower. |
| inferior goods | Goods for which demand fals when income increases. |
| substitutes | Goods that can serve as replacements gfor one another; when the price of one increases, demand for the other goes up. |
| perfect substitutes | Identical products. |
| complements, complementary goods | Goods that "go together"; a decrease in the price of one increases in demand for the other, and vice versa. |
| shift of demand curve | The change that takes place in a demand curve when a new relationship between quanity demanded of a good and the price of that good is brought about by a change in the original conditions. |
| movement along a demand curve | What happens when a change in price causes quantity demanded to change. |
| market demand | The sum of all the quantities of a good or service demanded per period by all the households buying in the market for that good or service. |
| profit | The diffetrence between revenues and costs. |
| quantity supplied | The amount of a particular product that a firm would be willing and able to offer for sale at a particular price during a given time period. |
| supply schedule | A table showing how much of a product firms will supply at different prices. |
| law of supply | The positive relationship between price and quantity of a good supplied: An increase in market price will lead to an increase in quantity supplied, and a decrease in market price will lead to a decrease in quantity supplied. |
| supply curve | A graph illustrating how much of a product a firm will supply at different prices. |
| market supply | A sum of all that is supplied each period by all producers of a single product. |
| equilibrium | The condition that exists when quantity supplied and quantity demanded are equal. At equilibrium, there is no tendency for price to change. |
| excess demand | The condition that exists when quantity demanded exceeds quantity supplied at the currrent price. |
| excess supply | The condition that exists when quantity supplied exceeds quantity demanded at the current price. |
