Key Terms
Please review the following key terms. (4)(5)
Ceteris paribus — 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 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.
Demand — the relationship between price and the quantity demanded of a certain good or service.
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.
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.
Factors of production — the combination of labor, materials, and machinery that is 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 combination of labor, materials, and machinery that is 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.
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 curve — a line that shows the relationship between price and quantity supplied on a graph, with quantity supplied on the horizontal