Key Concepts

Match each of the terms on the left with its definition on the right. Click on the term first and then click on the matching definition. As you match them correctly they will move to the bottom of the activity.

Question

markets
price system
willingness-to-pay
demand
law of demand
demand curve
demand schedule
horizontal summation
determinants of demand
normal goods
inferior goods
substitute goods
complementary goods
change in demand
change in quantity demanded
supply
law of supply
supply curves
determinants of supply
change in supply
change in quantity supplied
equilibrium
equilibrium price
equilibrium quantity
surplus
shortage
Goods consumers will substitute for one another depending on their relative prices. When the price of one good rises and the demand for another good increases, they are substitute goods, and vice versa. Substitutes have a positive cross elasticity of demand
The maximum amount of a product that buyers are willing and able to purchase over some time period at various prices, holding all other relevant factors constant (the ceteris paribus condition)
Market equilibrium quantity is the output that results when quantity demanded is just equal to quantity supplied
Market equilibrium price is the price that results when quantity demanded is just equal to quantity supplied
Occurs when the price of the product changes, shown as a movement along an existing supply curve
Holding all other relevant factors constant, as price increases, quantity supplied will rise, and as price declines, quantity supplied will fall
Occurs when one or more of the determinants of demand changes, shown as a shift in the entire demand curve
Nonprice factors that affect supply, including production technology, costs of resources, prices of other commodities, expectations, number of sellers, and taxes and subsidies
Nonprice factors that affect demand, including tastes and preferences, income, prices of related goods, number of buyers, and expectations
Market demand and supply curves are found by adding together how many units of the product will be purchased or supplied at each price
A graphical illustration of the law of supply, which shows the relationship between the price of a good and the quantity supplied
Institutions that bring buyers and sellers together so they can interact and transact with each other
The maximum amount of a product that sellers are willing and able to provide for sale over some time period at various prices, holding all other relevant factors constant (the ceteris paribus condition)
A name given to the market economy because prices provide considerable information to both buyers and sellers
Goods that have income elasticities that are negative. When consumer income grows, quantity demanded falls for inferior goods
Goods that are typically consumed together. When the price of a complementary good rises, the demand for the other good declines, and vice versa. Complements have a negative cross elasticity of demand
An individual’s valuation of a good or service, equal to the most an individual is willing and able to pay
A table that shows the quantity of a good a consumer purchases at each price
Market forces are in balance when the quantities demanded by consumers just equal the quantities supplied by producers
Occurs when the price is above market equilibrium, and quantity supplied exceeds quantity demanded
Occurs when the price of the product changes, shown as a movement along an existing demand curve
Goods that have positive income elasticities of less than 1. When consumer income grows, quantity demanded rises for normal goods, but less than the rise in income
A graphical illustration of the law of demand, which shows the relationship between the price of a good and the quantity demanded
Holding all other relevant factors constant, as price increases, quantity demanded falls, and as price decreases, quantity demanded rises
Occurs when one or more of the determinants of supply change, shown as a shift in the entire supply curve
Occurs when the price is below market equilibrium, and quantity demanded exceeds quantity supplied
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