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demand
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the desire to own something and the ability to pay for it
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terms list
demand
the desire to own something and the ability to pay for it
law of demand
economic law that states that consumers buy more of a good when its price decreases and less when its price increases
substitution effect
when consumers react to an increase in a good's price by consuming less of that good and more of other goods
income effect
the change in consumption resulting from a change in real income
demand schedule
table that lists the quantity of goods a person will buy at each different price
demand curve
a graph representing a demand schedule
normal good
goods consumers deal good that consumers demand more of when their incomes increase
inferior good
a good that consumers demand less of when their income increases
complements
two goods that are bought and used together
substitute
goods used in place of one another
elasticity of demand
a measure of how consumers react to a change in price
inelastic
describes demand that is not very sensitive to a change in price
elastic
describes demand that is very sensitive to a change in price
total revenue
the total amount of money a firm receives by selling goods or services
supply
the amount of goods available
law of supply
tendency of suppliers to offer more of a good at a higher price
supply schedule
a chart that lists how much of a good a supplier will offer at different prices
supply curve
a graph of the quantity supplied of a good at different prices
fixed cost
a cost that does not change, no matter how much of a good is produced
variable cost
a cost that rises or falls depending on how much is produced
total cost
fixed costs plus variable costs
marginal cost
the cost of producing one more unit of a good
marginal revenue
the additional income from selling one more unit of a good; sometimes equal to price
increasing marginal returns
a level of production in which the marginal product of labor increases as the number of workers increases
diminishing marginal returns
a level of production in which the marginal product of labor decreases as the number of workers increases
subsidy
A money payment or other form of aid that the government gives to a person or organization.
equilibrium
the point at which quantity demanded and quantity supplied are equal
price ceiling
a maximum price that can be legally charged for a good or service
price floor
a minimum price for a good or service
surplus
more than is needed
shortage
a situation in which a good or service is unavailable
factor payments
the income people receive for supplying factors of production, such as land, labor, or capital
firm
an organization that uses resources to produce a product, which it then sells
household
an economic unit of one person or more that sells resources and buys goods and services
factor market
market in which firms purchase the factors of production from households
product market
the market in which households purchase the goods and services that firms produce
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