Competitive Market: Is 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. Supply and Demand Model: Is a model of how a competitive market works. Quantity Demanded: Is the actual amount of a good or service consumers are willing and able to buy at some specific price. Demand Curve: Is a graphical representation of the demand schedule.
It shows the relationship between quantity demanded and price. Law of Demand: Says that 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. Change in Demand: Is the shift of the demand curve, which changes the quantity demanded of a good that is the result of a change in that good’s price. Movement Along the Demand Curve: Is a change in the quantity demanded of a good that is the result of a change in that good’s price. Substitutes: Two goods are substitutes if a rise in the price of one of the goods leads to a decrease in the demand for the other good. Complements: Two goods are complements if a rise in the price of one of the goods leads to a decrease in the demand for the other good. Normal Good: When a rise in income level increases the demand for a good­the normal case­it is a normal good. Inferior Good: When a rise in income decreases the demand for a good, it is an inferior good. Supply Curve: Shows the relationship between quantity supplied and price. Law of Supply: The law of supply says that, other things being equal, the price and quantity supplied of a good are positively related.

Movement Along the Supply Curve: Is a change in the quantity supplied of a good that is the result of a change in that good’s price. Input: Is anything that is used to produce a good or service. Equilibrium: An economic situation is in equilibrium when no individual would be better off doing something different. Equilibrium Price: The price that matches the quantity supplied and the quantity demanded is the equilibrium price. Surplus: There is a surplus of a good when the quantity supplied the quantity demanded. Surpluses occur when the price is above the equilibrium level. Shortage: There is a shortage of a good when the quantity demanded exceeds the quantity supplied. Shortages occur when the price is below it equilibrium level. Shifters of Supply: Input cost, Number of producers, Expectations,
Technology, Related Goods. Shifts of Demand: Population, Income, Preference, Expectations of
Future Prices, Related Goods. Double Shift: When both demand and supply increase, the equilibrium quantity increases but the change in equilibrium quantity is ambiguous. When both the demand and supply decrease, the equilibrium quantity decreases but the change in equilibrium price is ambiguous. Price Controls: Are legal restrictions on how high or low a market price may go. Price Ceiling: A maximum price sellers are allowed to charge for a good or service. Price Floor: A minimum price buyers are required to pay for a good or service. Wasted Resources: Price ceiling typically lead to inefficiency in the form of wasted resources: people expend money, effort, and time to cope with shortages caused by the price ceiling.

Black Market: A black market is a market in which goods or services are bought and sold illegally­ either because it is illegal to sell them at all or because the prices charged are legally prohibited by a price ceiling. Minimum Wage: Is a legal floor on the wage rate, which is the market price of labor. Wedge: In every case in which the supply of a good is legally restricted, there is a wedge between the demand price and the supply price of a good; that is, the price paid by buyers ends up being higher than that received by sellers. Quota Rent: The economic rent received by the holder of the