Basic Terms/Market Supply & Demand

the fundamental economic problem that human wants exceed the availability of time, goods, and resources

the study of how individuals and society choose to allocate scarce recources to satisfy unlimited wants

factors of production classified as: land, labor, and capital

a simplified description of reality used to understand and predict economic events

states that there is an inverse relationship between the price and quantity demanded, ceteris paribus

is one that consumer buys more of as their income increases

states that there is a derict relationship between the price and the quantity supplied

is one that there is an inverse relationship between changes in income and its demand curve

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

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

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

when the price of a good is greater than the equilibrium price, there is an excess quantity supplied

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

• max price established by govt.
• above the price is illegal
• to be effective, the regulated price must be set "below" P_E

• minnimum price established by the govt.
• below the price is illegal
• to be effective, regulated price must be set "above" P_E