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21 Cards in this Set
- Front
- Back
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supply curve
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Relationship between the quantity of a good that producers are willing to sell and the price of the good
Q (S) = Q S (P) the quantity supplied and the price |
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demand curve
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relationship between the quantity of a good that consumers are willing to buy and the price of the good
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substitutes
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Two goods for which an increase in the price of one leads to an increase in the quantity demanded of the other.
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complements
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two goods for which an increase in the price of one leads to a decrease in the quantity demanded of the other
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equilibrium (or market-clearing) price
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Price that equates the quantity supplied to the quantity demanded
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market mechanism
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tendency in a free market for price to change until the market clears.
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surplus
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situation in which the quantity supplied exceeds the quantity demanded
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shortage
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situation in which the quantity demanded exceeds the quantity supplied.
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elasticity
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percentage change in one variable resulting from a 1-percent increase in another.
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price elasticity of demand
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percentage change in quantity demanded of a good resulting from a 1-percent increase in its price
Ep = % (delta Q)/ % (delta P) |
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price elastic
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price elasticity greater than 1
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price inelastic
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price elasticity is less than 1
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linear demand curve
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demand curve that is a straigh line
Q = a - bP |
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infinitely elastic demand
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consumers will buy as much of a good as they can get at a single price, but for any higher price the quantity demanded drops to zero, while for any lower price the quantity demanded increases without limit
horizontal demand curve |
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completely inelastic demand
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consumers will buy a fixed quantity of a good regardless of its price
vertical demand curve |
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income elasticity of demand
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percentage change in the quantity demanded resulting from a 1-percent increase in income
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cross-price elasticity of demand
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Percentage change in the quantity demanded of one good resulting from a 1-percent increase in the price of another.
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price elasticity of supply
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percentage change in quantity supplied resulting from a 1-percent increase in price.
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point elasticity of demand
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price elasticity at a particular point on the demand curve.
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arc elasticity of demand
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price elasticity calculated over a range of prices
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cyclical industries
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industries in which sales tend to magnify cyclical changes in gross domestic product and national income.
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