Economics
Terms
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- black markets
- in which goods are exchanged illegally at prices that are higher than officially established prices
- law of demand
- an increase in a good's price causes a decrease in the quantity demanded and that a decrease in price causes an increase in quantity demanded
- substitute good
- goods that can be used to replace the purchase of similar goods when prices rise
- price floor
- is a government regulation that establishes a minimum level for prices
- price ceiling
- government regulation that establishes a maximum price for a particular goodq
- diminishing marginal utility
- the marginal, or additional, utility of each unit consumed diminishes, or lessens, with each additional unit
- elasticity of demand
- the degree to which changes in a good's price affect the quantity demanded by consumers
- demand curve
- a graphic representation of a demand schedule, showing the relationship between the price of an item and the quantity demanded during a given period, with all other things being equal
- public good
- is any good or service that is consumed by all members of a group
- income effect
- any increse or decrease in consumers' purchasing power caused by a change in price
- rationing
- is a system in which a government or other institution decides how to distribute a product
- substitution effect
- the tendency of consumers to substitute a similar, lower-priced product for another product that is relatively more expensive
- purchasing power
- the amount of money, or income, that people have available to spend on goods and services
- complementary goods
- goods that are commonly used with other goods
- elastic demand
- when a small change in a good's price causes a major, opposite change in the quantity demanded
- minimum wage
- example of price floor, this wage is the lowest amount an employer legally can pay a worker for a job
- demand schedule
- a table that shows the level of demand for a particular item at various prices
- inelastic demand
- when a change in a good's price has little impact on the quantity demanded
- shortage
- exists when the quantity demanded exceeds the quantity supplied at the price offered
- market equilibrium
- a situation that occurs when the quantity supplied and the quantity demanded for a product are equal at the same price
- total revenue
- sometimes called total receipts-- refers to the total income that a business receives from selling its products
- surplus
- exists when the quantity supplied exceeds the quantity demanded at the price offered
- determinants of demand
- consumer tastes and preferences, market size, income, prices of related goods, and consumer expectations