11 Key Terms

Key Terms

Please review the following key terms. (4)(5)

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.

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.

Demand — the relationship between price and the quantity demanded of a certain good or service.

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.

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.

Factors of production — the combination of labor, materials, and machinery that is 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 combination of labor, materials, and machinery that is 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.

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.

Substitute — a good that can replace another to some extent, so that greater consumption of one good can mean less of the other.

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.

Supply — the relationship between price and the quantity supplied of a certain good or service
.

Surplus — at the existing price, quantity supplied exceeds the quantity demanded; also called excess supply (1) .

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