Macroeconomics Chapter 3

Front 1

Market

Back 1

All of the arrangements that individuals have for exchanging with one another. Thus, for example, we can speak of the labor market, the automobile market, and the credit market.

Front 2

Demand

Back 2

A schedule showing how much of a good or service people will purchase at any price during a specified time period, other things being constant.

Front 3

Law of demand

Back 3

The observation that there is a negative, or inverse, relationship between the price of any good or service and the quantity demanded, holding other factors constant.

- when the price of a good goes up people buy less if it, other things being equal. When the price of a good goes down people buy more of it, other things being equal.

Front 4

Relative price

Back 4

The money price of one commodity divided by the money price of another commodity; the number of units of one commodity that must be sacrificed to purchase one unit of another commodity

Front 5

Money price

Back 5

The price expressed in today's dollars also called the absolute or nominal price.

Front 6

Demand curve

Back 6

A graphical representation of the demand schedule. It is a negatively sloped line showing the inverse relationship between the price and the quantity demanded (other things being equal)

Front 7

Market demand

Back 7

The demand of all consumers in the marketplace for a particular good or service. The summation at each price of the quantity demanded by each individual

Front 8

Ceteris paribus conditions

Back 8

Determinants of the relationship between price and quantity that are unchanged along a curve. Changes in these factors cause the curve to shift

Front 9

Normal goods

Back 9

Good for which demand rises as income rises. Most goods are normal goods

Front 10

Inferior goods

Back 10

Goods for which demand falls as income rises

Front 11

Substitutes

Back 11

Two goods are substitutes when a change in the price of one causes a shift in the demand for the other in the same direction as the price change

Front 12

Complements

Back 12

Two goods are complements when a change in the price if one causes an opposite shift in the demand for the other

Front 13

Demand refers to:

Back 13

A schedule of planned rated of purchase and depends on a great many ceteris paribus conditions such as incomes expectations and prices of substitutes or complements. Whenever there is a change in a ceteris paribus condition there will be a change in demand. A shift in the entire demand curve to the right or to the left

Front 14

Quantity demanded:

Back 14

A specific quantity at a specific price, represented by a single point on a demand curve

Front 15

Supply

Back 15

A schedule showing the relationship ship between price and quantity supplied for a specified period of time, other things being equal

Front 16

Law of supply

Back 16

The observation that the higher the price of a good, the more of that good sellers will make available over a specified time period, all other things being equal

Front 17

The supply schedule

Back 17

A table relating prices to the quantity supplied at each price. Can also be referred to as supply. It is a set of planned production rates that depends on the price of the product

Front 18

Supply curve

Back 18

The graphical representation of the supply schedule; a line showing the supply schedule, which generally slopes upward (has a positive slope) other things being equal.

Front 19

Subsidy

Back 19

A negative tax; a payment to a producer from the government, usually in the form of a cash grant per unit.

Front 20

A change or shift in supply

Back 20

A movement of the entire curve. The only thing that can cause the entire curve to move is a change in one of the ceteris paribus conditions

Front 21

A change in price

Back 21

Leads to a change in the quantity supplied, other things being constant, this is a movement along the curve

Front 22

Market clearing or equilibrium price

Back 22

The price that clears the market, at which quantity demanded equals quantity supplied; the price where the demand curve intersects the supply curve

Front 23

Equilibrium

Back 23

The situation when quantity supplied equals quantity demanded at a particular price

Front 24

Shortages

Back 24

A situation in which quantity demanded is greater than quantity supplied at a price below the market clearing price

Front 25

Surplus

Back 25

A situation in which quantity supplied is greater than quantity demanded at a price above the market clearing price