Krugman’s Economics for AP Section 2- Supply and Demand

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Competitive Market
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A market in which there are many buyers and sellers of the same good or service, none of whom can influence the price at which the good or service is sold
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Supply and Demand Model
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A model of how a competitive market works
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Demand Schedule
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Shows how much of a good or service consumers will be willing and able to buy at different prices
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Quantity Demanded
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The actual amount of a good or service consumers are willing and able to buy at some specific price
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Demand Curve
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A graphical representation of the demand schedule. It shows the relationship between quantity demanded and price
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Law of Demand
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A higher price for a good or service, all other things being equal, leads people to demand a smaller quantity of that good or service
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Change in Demand
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A shift of the demand curve, which changes the quantity demanded at any given price
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Movement along the demand curve
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A change in the quantity demanded of a good that is the result of a change in that good’s price
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Substitutes
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If a rise in the price of one of the goods leads to an increase in the demand for the other
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Complements
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If a rise in the price of one of the goods leads to a decrease in the demand for the other good
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Normal Good
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When a rise in income increases the demand for a good- the normal case
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Inferior Good
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When a rise in income decreases the demand for a good
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Individual Demand Curve
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Illustrates the relationship between quantity demanded and price for an individual consumer
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Quantity Supplied
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The actual amount of a good or service producers are willing to sell at some specific price
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Supply Schedule
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Shows how much of a good or service producers will supply at different prices
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Supply Curve
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Shows the relationship between quantity supplied and price
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The Law of Supply
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With other things being equal, the price and quantity supplied of a good are positively related
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Change in Supply
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A shift of the supply curve, which changes the quantity supplied at any given price
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Movement Along the Supply Curve
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A change in the quantity supplied of a good that is the result of a change in that good’s price
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Input
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Anything that is used to produce a good or service
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Individual Supply Curve
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Illustrates the relationship between quantity supplied and price for an individual producer
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Equilibrium
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When no individual would be better off doing something different
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Equilibrium Price
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When price has moved to a level at which the quantity demanded of a good equals the quantity supplied of that good
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Market-Clearing Price
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Another word for equilibrium price
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Equilibrium Quantity
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The quantity of the good bought and sold at that price
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Surplus
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When the quantity supplied exceeds the quantity demanded. This occurs when the price is above its equilibrium level.
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Shortage
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When the quantity demanded exceeds the quantity supplied. This occurs when the price is below its equilibrium level.

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