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3.10: Conclusion

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    Conclusion

    We have covered a lot of ground in this chapter. It is intended to open up the vista of economics to the new student in the discipline. Economics is powerful and challenging, and the ideas we have developed here will serve as conceptual foundations for our exploration of the subject. Our next chapter deals with measurement and responsiveness.

    Key Concepts

    Demand is the quantity of a good or service that buyers wish to purchase at each possible price, with all other influences on demand remaining unchanged.

    Supply is the quantity of a good or service that sellers are willing to sell at each possible price, with all other influences on supply remaining unchanged.

    Quantity demanded defines the amount purchased at a particular price.

    Quantity supplied refers to the amount supplied at a particular price.

    Equilibrium price: equilibrates the market. It is the price at which quantity demanded equals the quantity supplied.

    Excess supply exists when the quantity supplied exceeds the quantity demanded at the going price.

    Excess demand exists when the quantity demanded exceeds quantity supplied at the going price.

    Short side of the market determines outcomes at prices other than the equilibrium.

    Demand curve is a graphical expression of the relationship between price and quantity demanded, with other influences remaining unchanged.

    Supply curve is a graphical expression of the relationship between price and quantity supplied, with other influences remaining unchanged.

    Substitute goods: when a price reduction (rise) for a related product reduces (increases) the demand for a primary product, it is a substitute for the primary product.

    Complementary goods: when a price reduction (rise) for a related product increases (reduces) the demand for a primary product, it is a complement for the primary product.

    Inferior good is one whose demand falls in response to higher incomes.

    Normal good is one whose demand increases in response to higher incomes.

    Comparative static analysis compares an initial equilibrium with a new equilibrium, where the difference is due to a change in one of the other things that lie behind the demand curve or the supply curve.

    Price controls are government rules or laws that inhibit the formation of market-determined prices.

    Quotas are physical restrictions on output.

    Market demand: the horizontal sum of individual demands.


    This page titled 3.10: Conclusion is shared under a CC BY-NC-SA license and was authored, remixed, and/or curated by Douglas Curtis and Ian Irvine (Lyryx) .

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