8 Chapter 3 Key Terms

Key Terms

ceteris paribus: other things being equal

complements: goods that are often used together so that consumption of one good tends to enhance consumption of the other

consumer surplus: the extra 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

deadweight loss: the loss in social surplus that occurs when a market produces an inefficient quantity

demand: the relationship between price and the quantity demanded of a certain good or service

demand curve: a graphic representation of the relationship between price and quantity demanded of a certain good or service, with quantity on the horizontal axis and the price on the vertical axis

demand schedule: a table that shows a range of prices for a certain good or service and the quantity demanded at each price

economic surplus: see social surplus

equilibrium: the situation where quantity demanded is equal to the quantity supplied; the combination of price and quantity where there is no economic pressure from surpluses or shortages that would cause price or quantity to change

equilibrium price: the price where quantity demanded is equal to quantity supplied

equilibrium quantity: the quantity at which quantity demanded and quantity supplied are equal for a certain price level

excess demand: at the existing price, the quantity demanded exceeds the quantity supplied; also called a shortage

excess supply: at the existing price, quantity supplied exceeds the quantity demanded; also called a surplus

factors of production: the resources such as labor, materials, and machinery that are used to produce goods and services; also called inputs

inferior good: a good in which the quantity demanded falls as income rises, and in which quantity demanded rises and income falls

inputs: the resources such as labor, materials, and machinery that are used to produce goods and services; also called factors of production

law of demand: the common relationship that a higher price leads to a lower quantity demanded of a certain good or service and a lower price leads to a higher quantity demanded, while all other variables are held constant

law of supply: the common relationship that a higher price leads to a greater quantity supplied and a lower price leads to a lower quantity supplied, while all other variables are held constant

normal good: a good in which the quantity demanded rises as income rises, and in which quantity demanded falls as income falls

price: what a buyer pays for a unit of the specific good or service

price ceiling: a legal maximum price

price control: government laws to regulate prices instead of letting market forces determine prices

price floor: a legal minimum price

producer surplus: the extra benefit producers 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

quantity demanded: the total number of units of a good or service consumers are willing to purchase at a given price

quantity supplied: the total number of units of a good or service producers are willing to sell at a given price

shift in demand: when a change in some economic factor (other than price) causes a different quantity to be demanded at every price

shift in supply: when a change in some economic factor (other than price) causes a different quantity to be supplied at every price

shortage: at the existing price, the quantity demanded exceeds the quantity supplied; also called excess demand

social surplus: the sum of consumer surplus and producer surplus

substitute: a good that can replace another to some extent, so that greater consumption of one good can mean less of the other

supply: the relationship between price and the quantity supplied of a certain good or service

supply curve: a line that shows the relationship between price and quantity supplied on a graph, with quantity supplied on the horizontal axis and price on the vertical axis

supply schedule: a table that shows a range of prices for a good or service and the quantity supplied at each price

surplus: at the existing price, quantity supplied exceeds the quantity demanded; also called excess supply

total surplus: see social surplus

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