Microeconomic pt2

• 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
• Perfectly competitive markets


  • The goods being offered for sale are all the same
  • The buyers and sellers are so numerous that no single buyer or seller can influence 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
• 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
• 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
• Ceteris paribus


  A Latin phrase, translated as "other things being equal," used as a reminder that all variables other than the ones being studied are assumed to be constant
• 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 supply and demand have been brought into balance
• Equilibrium price


  The price that balances supply and demand
• Equilibrium quantity


  The quantity supplied and the quantity demanded when the price has adjusted to balance supply and demand
• 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 supply and demand 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