| Term | Definition |
|---|---|
| constraints | Limitations that restrict economic agents' choices, such as income, time, legal frameworks, or regulatory requirements. |
| demand curve | A graph showing the relationship between the price of a good and the quantity demanded at each price level, typically downward-sloping. |
| demand curve shift | A change in the entire demand curve caused by changes in determinants of demand other than the good's own-price. |
| demand schedule | A table showing the quantities of a good demanded at different price levels. |
| determinants of consumer demand | Factors other than price that influence the quantity of a good consumers are willing to buy, causing shifts in the demand curve. |
| diminishing marginal utility | The principle that as a consumer consumes more of a good, the additional satisfaction gained from each additional unit decreases. |
| incentives | Factors that motivate economic actors to make particular choices or take specific actions. |
| income effect | The change in quantity demanded resulting from a change in a consumer's purchasing power due to a price change. |
| law of demand | An economic principle stating that as the price of a good increases, the quantity demanded decreases, and vice versa, assuming all other factors remain constant. |
| marginal benefits | The additional benefit or satisfaction gained from consuming or producing one more unit of a good. |
| market demand curve | The aggregate demand curve derived by summing all individual consumers' demand curves at each price level. |
| property rights | Legal entitlements that specify who owns a resource and what they can do with it; well-defined property rights help internalize externalities. |
| quantity demanded | The amount of a good or service that consumers are willing and able to purchase at a given price. |
| substitution effect | The change in quantity demanded resulting from a consumer switching to relatively cheaper alternatives when a good's price increases. |
| Term | Definition |
|---|---|
| determinants of supply | Factors other than price that affect the quantity of a good producers are willing to supply, including technology, input costs, and producer expectations. |
| incentives | Factors that motivate economic actors to make particular choices or take specific actions. |
| individual supply curves | The supply curves of individual producers showing the quantity each producer is willing to supply at different price levels. |
| law of supply | The economic principle that states the quantity supplied of a good increases when its price increases and decreases when its price decreases, assuming all other factors remain constant. |
| market supply curve | The horizontal summation of all individual supply curves, showing the total quantity supplied by all producers at each price level. |
| movement along a supply curve | A change in quantity supplied caused by a change in the good's own price, represented by moving along the existing supply curve rather than shifting the curve itself. |
| own-price | The price of a good itself, as opposed to prices of other goods; the primary factor causing movement along a supply curve. |
| price | The amount of money required to purchase a good or service in a market. |
| quantity supplied | The amount of a good or service that producers are willing and able to offer for sale at a specific price. |
| supply curve | A graph showing the relationship between the price of a good and the quantity that producers are willing to supply at each price level. |
| technology | Methods and tools used in production that can affect the efficiency and cost of producing goods, thereby influencing supply decisions. |
| upward-sloping | The characteristic shape of a supply curve, indicating that quantity supplied increases as price increases. |
| Term | Definition |
|---|---|
| availability of substitutes | The extent to which alternative goods can replace a given good, which is a key factor affecting price elasticity of demand. |
| elastic demand | A situation where the magnitude of price elasticity of demand is greater than 1, meaning quantity demanded is highly responsive to price changes. |
| elasticity | A measure of the responsiveness of quantity demanded or supplied to changes in price or other economic variables. |
| inelastic demand | A situation where the magnitude of price elasticity of demand is less than 1, meaning quantity demanded is not very responsive to price changes. |
| measures of elasticity | Quantitative calculations used to determine the degree of responsiveness of economic variables to changes in factors such as price, income, or other determinants. |
| price change | A shift in the market price of a good or service that affects consumer and producer behavior. |
| price elasticity of demand | A measure of the responsiveness of quantity demanded to changes in price, calculated as the percentage change in quantity demanded divided by the percentage change in price. |
| quantity demanded | The amount of a good or service that consumers are willing and able to purchase at a given price. |
| total expenditure | The total amount consumers spend on a good or service, calculated as price multiplied by quantity purchased. |
| total revenue | The total income a firm receives from selling its goods or services, calculated as price multiplied by quantity sold. |
| unit elastic | A situation where the magnitude of price elasticity of demand equals 1, meaning the percentage change in quantity demanded is proportional to the percentage change in price. |
| Term | Definition |
|---|---|
| alternative inputs | Substitute factors of production that can be used in place of other inputs in the production process, affecting the elasticity of supply. |
| elastic supply | A supply condition where the magnitude of price elasticity of supply is greater than 1, indicating that quantity supplied is highly responsive to price changes. |
| elasticity | A measure of the responsiveness of quantity demanded or supplied to changes in price or other economic variables. |
| inelastic supply | A supply condition where the magnitude of price elasticity of supply is less than 1, indicating that quantity supplied is not very responsive to price changes. |
| measures of elasticity | Quantitative calculations used to determine the degree of responsiveness of economic variables to changes in factors such as price, income, or other determinants. |
| percentage change in price | The proportional change in price from one level to another, expressed as a percentage. |
| percentage change in quantity supplied | The proportional change in the amount supplied from one level to another, expressed as a percentage. |
| price change | A shift in the market price of a good or service that affects consumer and producer behavior. |
| price elasticity of supply | A measure of the responsiveness of quantity supplied to changes in price, calculated as the percentage change in quantity supplied divided by the percentage change in price. |
| quantity supplied | The amount of a good or service that producers are willing and able to offer for sale at a specific price. |
| total expenditure | The total amount consumers spend on a good or service, calculated as price multiplied by quantity purchased. |
| total revenue | The total income a firm receives from selling its goods or services, calculated as price multiplied by quantity sold. |
| unit elastic supply | A supply condition where the magnitude of price elasticity of supply equals 1, indicating that the percentage change in quantity supplied equals the percentage change in price. |
| Term | Definition |
|---|---|
| complements | Goods that are typically consumed together, indicated by negative cross-price elasticity of demand. |
| cross-price elasticity of demand | A measure of the responsiveness of quantity demanded of one good to changes in the price of another good, calculated as the percentage change in quantity demanded of one good divided by the percentage change in price of another good. |
| elasticity | A measure of the responsiveness of quantity demanded or supplied to changes in price or other economic variables. |
| income elasticity of demand | A measure of the responsiveness of quantity demanded to changes in consumers' income, calculated as the percentage change in quantity demanded divided by the percentage change in income. |
| inferior good | A good for which quantity demanded decreases when consumer income increases, indicated by negative income elasticity of demand. |
| measures of elasticity | Quantitative calculations used to determine the degree of responsiveness of economic variables to changes in factors such as price, income, or other determinants. |
| normal good | A good for which quantity demanded increases when consumer income increases, indicated by positive income elasticity of demand. |
| price change | A shift in the market price of a good or service that affects consumer and producer behavior. |
| substitutes | Goods that can be used in place of each other, indicated by positive cross-price elasticity of demand. |
| total expenditure | The total amount consumers spend on a good or service, calculated as price multiplied by quantity purchased. |
| total revenue | The total income a firm receives from selling its goods or services, calculated as price multiplied by quantity sold. |
| Term | Definition |
|---|---|
| consumer surplus | The difference between the maximum price consumers are willing to pay for a good and the actual price they pay, representing the benefit consumers receive from purchasing at market price. |
| equilibrium | The market condition where the quantity supplied equals the quantity demanded, resulting in a stable price with no tendency to change. |
| equilibrium price | The price at which the quantity supplied equals the quantity demanded in a market. |
| equilibrium quantity | The quantity of a good or service that is both supplied and demanded at the equilibrium price. |
| market efficiency | A condition where perfectly competitive markets maximize total economic surplus in the absence of market failures. |
| market equilibrium | The point where the quantity supplied equals the quantity demanded at a particular price, resulting in no shortage or surplus in the market. |
| market failures | Situations where markets fail to allocate resources efficiently, preventing the maximization of total economic surplus. |
| perfectly competitive markets | Markets characterized by many buyers and sellers, homogeneous products, free entry and exit, and perfect information where individual firms are price takers. |
| producer surplus | The difference between the actual price received by a producer and the minimum price at which they are willing to supply a good, representing the benefit producers receive from selling at market price. |
| quantity demanded | The amount of a good or service that consumers are willing and able to purchase at a given price. |
| quantity supplied | The amount of a good or service that producers are willing and able to offer for sale at a specific price. |
| supply-demand model | An economic tool used to understand the factors that influence prices and quantities in markets and explain price and quantity differences across markets or over time. |
| total economic surplus | The sum of consumer surplus and producer surplus, representing the total benefit to society from market exchange. |
| Term | Definition |
|---|---|
| consumer surplus | The difference between the maximum price consumers are willing to pay for a good and the actual price they pay, representing the benefit consumers receive from purchasing at market price. |
| equilibrium | The market condition where the quantity supplied equals the quantity demanded, resulting in a stable price with no tendency to change. |
| equilibrium price | The price at which the quantity supplied equals the quantity demanded in a market. |
| equilibrium quantity | The quantity of a good or service that is both supplied and demanded at the equilibrium price. |
| market conditions | The factors affecting supply and demand in a market, such as consumer preferences, input costs, or technological changes. |
| market disequilibrium | A market condition where the quantity supplied does not equal the quantity demanded, causing prices and quantities to be out of balance. |
| market shocks | Unexpected events or changes in underlying conditions that cause sudden shifts in supply or demand, moving a market away from equilibrium. |
| perfectly competitive markets | Markets characterized by many buyers and sellers, homogeneous products, free entry and exit, and perfect information where individual firms are price takers. |
| price | The amount of money required to purchase a good or service in a market. |
| price elasticity of demand | A measure of the responsiveness of quantity demanded to changes in price, calculated as the percentage change in quantity demanded divided by the percentage change in price. |
| price elasticity of supply | A measure of the responsiveness of quantity supplied to changes in price, calculated as the percentage change in quantity supplied divided by the percentage change in price. |
| producer surplus | The difference between the actual price received by a producer and the minimum price at which they are willing to supply a good, representing the benefit producers receive from selling at market price. |
| quantity | The amount of a good or service that is bought or sold in a market. |
| shortage | A situation in which the quantity demanded of a good exceeds the quantity supplied at a given price, resulting in insufficient supply. |
| surplus | A situation in which the quantity supplied of a good exceeds the quantity demanded at a given price, resulting in excess inventory. |
| total economic surplus | The sum of consumer surplus and producer surplus, representing the total benefit to society from market exchange. |
| Term | Definition |
|---|---|
| allocative efficiency | An economic outcome where price equals marginal cost and resources are allocated to their highest-valued uses. |
| consumer behavior | The decisions and actions of buyers in response to changes in prices, income, and other economic factors. |
| deadweight loss | The loss of economic efficiency that occurs when equilibrium is not at the socially optimal quantity, resulting in reduced total surplus. |
| government policies | Actions and regulations implemented by government to influence economic activity and market outcomes. |
| incentives | Factors that motivate economic actors to make particular choices or take specific actions. |
| market outcomes | The results of market activity, including equilibrium price and quantity, consumer surplus, producer surplus, and deadweight loss. |
| price ceilings | A government-imposed maximum price above which a good cannot be sold, preventing prices from rising to equilibrium. |
| price floors | A government-imposed minimum price below which a good cannot be sold, preventing prices from falling to equilibrium. |
| price regulation | Government policies that control the prices firms can charge for goods and services. |
| producer behavior | The decisions and actions of sellers in response to changes in prices, costs, and other economic factors. |
| quantity regulation | Government policies that control the quantity of goods and services that can be produced or traded in a market. |
| subsidies | Government payments or incentives that can be used to encourage production or consumption of goods that generate positive externalities. |
| subsidy incidence | The distribution of benefits from a subsidy between buyers and sellers, determined by the relative elasticity of supply and demand. |
| tax incidence | The distribution of the tax burden between buyers and sellers, determined by the relative elasticity of supply and demand. |
| taxes | Mandatory payments to the government that can be used to discourage production or consumption of goods that generate negative externalities. |
| Term | Definition |
|---|---|
| autarky | An economic state in which a country is self-sufficient and does not engage in international trade. |
| consumer surplus | The difference between the maximum price consumers are willing to pay for a good and the actual price they pay, representing the benefit consumers receive from purchasing at market price. |
| equilibrium price | The price at which the quantity supplied equals the quantity demanded in a market. |
| government policies | Actions and regulations implemented by government to influence economic activity and market outcomes. |
| international trade | The exchange of goods and services between countries, involving imports and exports. |
| market outcomes | The results of market activity, including equilibrium price and quantity, consumer surplus, producer surplus, and deadweight loss. |
| markets | Systems where buyers and sellers interact to exchange goods, services, or resources, determining prices through supply and demand. |
| producer surplus | The difference between the actual price received by a producer and the minimum price at which they are willing to supply a good, representing the benefit producers receive from selling at market price. |
| quotas | Limits set by a government on the quantity of a good that can be imported, used to alter quantities produced and affect domestic price and economic surplus. |
| tariffs | Taxes imposed by a government on imported goods that increase the domestic price of those goods and affect consumer surplus, producer surplus, and government revenue. |
| total economic surplus | The sum of consumer surplus and producer surplus, representing the total benefit to society from market exchange. |