Market
A group of buyers and sellers of a particular good or service
Competitive Market
A market in which there are many buyers and many sellers so that each has a negligible impact on the market price
Quantity Demanded
The amount of a good that buyers are willing and able to purchase
Law of Demand
The claim that, other things equal, the quantity demanded of a good falls when the price of the good rises
Demand Schedule
A table that shows the relationship between the price of a good and the quantity demanded
Demand Curve
A graph of the relationship between the price of a good and the quantity demanded
Normal Good
A good for which, other things equal, an increase in income leads to an increase in demand
Inferior Good
A good for which, other things equal, an increase in income leads to a decrease in demand
Substitutes
Two goods for which an increase in the price of one leads to an increase in the demand for the other
Complements
Two goods for which an increase in the price of one leads to a decrease in the demand for the other
Quantity Supplied
The amount of a good that sellers are willing and able to sell
Law of Supply
The claim that, other things equal, the quantity supplied of a good rises when the price of the good rises
Supply Schedule
A table that shows the relationship between the price of a good and the quantity supplied
Supply Curve
A graph of the relationship between the price of a good and the quantity supplied
Equilibrium
A situation in which the market price has reached the level at which quantity supplied equals quantity demanded
Equilibrium Price
The price that balances quantity supplied and quantity demanded
Equilibrium Quantity
The quantity supplied and the quantity demanded at the equilibrium price
Surplus
A situation in which quantity supplied is greater than quantity demanded
Shortage
A situation in which quantity demanded is greater than quantity supplied
Law of Supply and Demand
The claim that the price of any good adjusts to bring the quantity supplied and the quantity demanded for that good into balance
elasticity
a measure of the responsiveness of quantity demanded or quantity supplied to one of its determinants
price elasticity of demand
a measure of how much the quantity demanded of a good responds to a change in the price of that good, computed as the percentage change in quantity demanded divided by the percentage change in price
total revenue
the amount paid by buyers and received by sellers of a good, computed as the price of the good times the quantity sold
income elasticity of demand
a measure of how much the quantity demanded of a good responds to a change in consumers' income, computed as the percentage change in quantity demanded divided by the percentage change in income
cross-price elasticity of demand
a measure of how much the quantity demanded of one good responds to a change in the price of another good, computed as the percentage change in quantity demanded of the first good divided by the percentage change in the price of the second good
price elasticity of supply
a measure of how much the quantity supplied of a good responds to a change in the price of that good, computed as the percentage change in quantity supplied divided by the percentage change in price
price ceiling
a legal maximum on the price at which a good can be sold
price floor
a legal minimum on the price at which a good can be sold
tax incidence
the manner in which the burden of a tax is shared among participants in a market