Economics Unit 3 Vocab pridgenr

Quantity demanded
the amount demanded at a single price
the desire, ability, and willingness to buy a product.
Law of Demand
the law that states that the quantity demanded varies inversely with its price.
Schedule (demand)
listing showing the quantity demanded at all possible prices that might prevail in the market at a given time.
Curve (demand)
graph showing the quantity demanded at each and every possible price that might prevail in the market at a given time.
Complementary good
products that increase the use of other products.
Substitute good
competing products that can be used for one another; products related in such a way that an increase in the price of one increases the demand for the other.
Real income effect
states that individuals cannot keep buying the same quantity of a product if its prices rise while their income stays the same (purchasing power).
Substitution effect
states that if two items satisfy the same need and the price of one rises, people will buy the other.
Marginal utility
usefulness of one additional unit
Diminishing Marginal Utility
states that the additional satisfaction a consumer gets from purchasing one more unit of a product will lessen with each additional unit purchased.
rise and fall of a product’s price greatly affects the amount that people are willing to buy.
a product’s price change has little impact on quantity demanded by consumer.
Unit elastic
elasticity where a change in the independent variable (usually price) generates a proportional change of the dependent variable (quantity demanded or supplied).
Quantity supply
amount offered for sale at a given price; point on the supply curve.
amount of a product offered for sale at all possible prices in a market.
Law of Supply
principle that more will be offered for sale at high prices than at lower prices.
Diminishing Returns
as more of one input is added to a fixed supply of other resources, productivity increases up to a point. At some point, however, the marginal product will diminish. Eventually, it will result in negative returns.
factors, other than price, that determine the quantities supplied of a good or service.
Voluntary exchange
act of buyers and sellers freely and willingly engaging in market transactions; characteristic of capitalism and free enterprise.
meeting place or mechanism allowing buyers and sellers of an economic product to come together; may be local, regional, national, or global.
Equilibrium price
price where quantity supplied equals quantity demanded; price that clears the market.
Market clearing price
the price of goods or a service at which quantity supplied is equal to quantity demanded; also called equilibrium price.
situation where quantity supplied is less than quantity demanded at a given price.
situation where quantity supplied is greater than quantity demanded at a given price.
Price floor
lowest legal price that can be charged for a product.
Price ceiling
maximum legal price that can be charged for a product.
Marginal cost
extra cost of producing one additional unit of production.
Total cost
fixed cost + variable cost; all costs associated with production.
total revenue total cost; extent to which persons or organizations are better off at the end of a period than they were at the beginning.
Marginal product
extra output due to the addition of one unit of input.
Total revenue
price x quantity demanded; total amount earned by a firm from the sale of its products.
Marginal revenue
extra revenue from the sale of one additional unit of input.
Fixed cost
costs of production that do not change as a firm’s output level changes; cost that must be paid whether the firm produces or not.
Variable cost
costs of production that change as output changes; labor, energy, raw materials
Economies of scale
a long run concept that refers to reductions in unit cost as the size of a facility and the usage levels of other inputs increase.

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