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Microeconomics — Supply and Demand

Core concepts of market economics

S
supply_side_sue 15 terms Jan 17, 2026
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Terms 15

1
Law of Demand
As price rises, quantity demanded falls; inverse relationship
2
Law of Supply
As price rises, quantity supplied increases; direct relationship
3
Equilibrium Price
Price where quantity supplied equals quantity demanded
4
Surplus
When quantity supplied exceeds quantity demanded at a given price
5
Shortage
When quantity demanded exceeds quantity supplied at a given price
6
Elasticity
Responsiveness of quantity to a change in price
7
Inelastic Demand
Quantity demanded changes little when price changes; e.g. insulin
8
Elastic Demand
Quantity demanded changes greatly when price changes; e.g. luxury goods
9
Price Ceiling
Maximum legal price set below equilibrium; causes shortages
10
Price Floor
Minimum legal price set above equilibrium; causes surpluses
11
Consumer Surplus
Difference between what consumers are willing to pay and what they do pay
12
Producer Surplus
Difference between price received and minimum a producer would accept
13
Substitutes
Goods that can replace each other; rise in price of one increases demand for other
14
Complements
Goods used together; rise in price of one decreases demand for other
15
Market Failure
When free markets fail to allocate resources efficiently; e.g. externalities