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