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market
a group of buyers and sellers of a particular good or service
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competitive market
a market in which there are many buyers and many sellers so that each has a negligible impact on the market price
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quantity demanded
the amount of a good that buyers are willing and able to purchase
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law of demand
the claim that, all other things equal, the quantity demanded of a good falls when the price of the good rises
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demand schedule
a table that shows the relationship between the price of a good and the quantity demanded
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demand curve
a graph of the relationships between the price of a good and the quantity demanded
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normal good
a good for which, all other things equal, an increase in income leads to an increase in demand
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inferior good
a good for which, all other things equal, an increase in income leads to a decrease in demand
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substitutes
two goods for which an increase in the price of one leads to an increase in demand for the other
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complements
two goods for which an increase in the price of one leads to a decrease in demand for the other
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quantity supplied
the amount of a good that sellers are willing and able to sell
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law of supply
the claim that, all other things equal, the quantity supplied of a good rises when the price of the good rises
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supply schedule
a table that shows the relationship between the price of a good and the quantity supplied
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supply curve
a graph of the relationship between the price of a good and the quantity supplied
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equilibrium
a situation in which the price has reached the level where quantity supplied equals quantity demanded
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equilibrium price
the price that balances quantity supplied and quantity demanded
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equilibrium supply
the quantity supplied and the quantity demanded at the equilibrium price
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shortage
a situation in which the quantity demanded is greater than the quantity supplied
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law of supply and demand
the claim that the price of any good adjusts to bring the quantity supplied and the quantity demanded for that good into balance
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