KEY TERMS

ceteris paribus  all 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  the relationship between price and the quantity demanded of a certain good or service

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

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

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

excess demand  at the existing price, the quantity demanded exceeds the quantity supplied; also called a shortage

excess supply  at the existing price, quantity supplied exceeds the quantity demanded; also called a surplus

factors of production  the resources such as labor, materials, and machinery that are 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 resources such as labor, materials, and machinery that are 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

producer surplus  the extra benefit producers receive from selling a good or service, measured by the price the producer actually received minus the price the producer would have been willing to accept

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

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

surplus  at the existing price, quantity supplied exceeds the quantity demanded; also called excess supply