Supply and demand together

• Market Equilibrium 


  One point at which the supply and demand curves intersect
• Equilibrium

  A situation in which a supply and demand have been brought into balance
• Equilibrium price


  The price that balances the 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 a 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
• Supply


  Refers to the position of the supply curve
• Quantity Supplied


  Refers to the amount suppliers wish to sell.
• Change in Supply


  A shift in the supply curve
• Change in demand 


  A shift in the demand curve
• Change in the quantity supplied 


  A movement along a fixed supply curve
• Change in the quantity demanded 


  A movement along a fixed demand curve
• 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
• Income elasticity of demand


  a measure of how much the Quantity demanded of a good responds to a change in consumer 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 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
• 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
• 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
• 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 selllers so that each has negligible impact on the market price
• Oligopoly 


  has a fewer sellers that do not always compete aggressively
• Airlines routes


  Examples of Oligopoly
• Monopolistic competitive


  It contains many selllers, each offering a slightly different product
• Software industry

  Example of monopolistically competitive
• Quantity demanded 


  the amount of a good that buyers are willing and able to purchase
• • Price
  • income
  • tastes
  • expectations 


  Determinants the quantity and individual demands
• 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
• Substitute 


  two goods for which an increase in the price at 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 deceease 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 that shows the relationship between the price of a good and the quantity demanded
• Ceteris paribus 


  other things being equal
• • price
  • input prices
  • technology
  • expectations

  Determinants of individual supplies
• Price 


  The quantity supplied rises as the prises and falls as rhe price falls, we say that the quantity supplied to is possitively related to the price of the good
• Input Prices


  the supply of a good is negatively related to the price of the inputs used to make the good