Macro Economics Chapter 03 Key Words

Question 2

change in demand

Answer 2

An increase or a decrease in the quantity demanded at each possible price. An increase in demand is a rightward shift in the entire demand curve. A decrease in demand is a leftward shift in the entire demand curve.

Question 3

change in quantity demanded

Answer 3

A movement between points along a stationary demand curve, ceteris paribus.

Question 4

change in quantity supplied

Answer 4

A movement between points along a stationary supply curve, ceteris paribus.

Question 5

change in supply

Answer 5

An increase or a decrease in the quantity supplied at each possible price. An increase in supply is a rightward shift in the entire supply curve. A decrease in supply is a leftward shift in the entire supply curve.

Question 6

complementary good

Answer 6

A good that is jointly consumed with another good. As a result, there is an inverse relationship between a price change for one good and the demand for its “go together” good.

Question 7

consumer surplus

Answer 7

The value of the difference between the price consumers are willing to pay for a product on the demand curve and the price actually paid for it.

Question 8

deadweight loss

Answer 8

The net loss of consumer and producer surplus for underproduction or overproduction of a product.

Question 9

demand

Answer 9

A curve or schedule showing the various quantities of a product consumers are willing to purchase at possible prices during a specified period of time, ceteris paribus.

Question 10

equilibrium

Answer 10

A market condition that occurs at any price and quantity where the quantity demanded and the quantity supplied are equal.

Question 11

inferior good

Answer 11

Any good for which there is an inverse relationship between changes in income and its demand curve.

Question 12

law of demand

Answer 12

The principle that there is an inverse relationship between the price of a good and the quantity buyers are willing to purchase in a defined time period, ceteris paribus.

Question 13

law of supply

Answer 13

The principle that there is a direct relationship between the price of a good and the quantity sellers are willing to offer for sale in a defined time period, ceteris paribus.

Question 14

market

Answer 14

Any arrangement in which buyers and sellers interact to determine the price and quantity of goods and services exchanged.

Question 15

normal good

Answer 15

Any good for which there is a direct relationship between changes in income and its demand curve.

Question 16

price system

Answer 16

A mechanism that uses the forces of supply and demand to create an equilibrium through rising and falling prices.

Question 17

producer surplus

Answer 17

The value of the difference between the actual selling price of a product and the price producers are willing to sell it for on the supply curve.

Question 18

shortage

Answer 18

A market condition existing at any price where the quantity supplied is less than the quantity demanded.

Question 19

substitute good

Answer 19

A good that competes with another good for consumer purchases. As a result, there is a direct relationship between a price change for one good and the demand for its “competitor” good.

Question 20

supply

Answer 20

A curve or schedule showing the various quantities of a product sellers are willing to produce and offer for sale at possible prices during a specified period of time, ceteris paribus.

Question 21

surplus

Answer 21

A market condition existing at any price where the quantity supplied is greater than the quantity demanded.