Introductory Microeconomics

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• Market a general term describing the economic institutions where exchanges of goods and services are made
• Price the amount of money required in exchange for a unit of a good or service
• Inverse relationship an inverse relationship is said to exist between A and B if an increase in A results in a decrease in B (A and B move in opposite directions)
• Substitution effect when the price of an individual good changes, consumers tend to purchase more of relatively cheaper goods and less of relatively more expensive substitutes
• Income effect when the price of an individual good increases or decreases, this affects the consumer's ability to purchase that good and all other goods. This change in purchasing power has an impact on the quantity of goods demanded and is called the income effect
• Income the amount of money received in a given period of time
• Direct relationship a direct relationship exists between A and B if the increase or decrease together, i.e., an increase in A implies an increase in B
• Substitutes goods that perform the same function are termed substitutes; coffee and tea, hamburgers and hot dogs, and pens and pencils are examples of pairs of substitutes
• Complement goods that are used together are called complements; toast and jam, coffee and sugar, and hamburgers and french fries are all examples of complements
• Demand curve a curve that shows the quantity of a good or service that buyers wish to purchase at every possible price
• Increase in demand a change in income, tastes or some other determinant of demand that causes the quantity demanded of some good to rise at every price (shown by a shift to the right in the demand curve)
• Decrease in demand a change in income, tastes and preferences, or some other determinant of demand, which causes the quantity demanded to be lower at every price (shown by a shift to the left in the demand curve)
• Supply a description of the seller side of the market; supply looks at the factors that determine the amounts and kinds of goods and services offered for sale
• Inputs factors of production; goods and services that are used in the production of other goods and services (labour, raw materials, and so on)
• Technology the process by which inputs are combined to produce goods and services; changes in technology involve changes in the processes that are used to make goods and services
• Supply curve a curve that shows the quantity of a good or service that producers wish to sell at every possible price
• Increase in supply a change in the costs of production, technology, or some other determinant of supply that causes the quantity supplied to increase at every price (shown by a shift to the right in the supply curve)
• Decrease in supply a change in costs of production, technology, or some other determinant of supply, which causes the quantity supplied to be less at every price (shown by a shift to the left in the supply curve)
• Surplus a situation where the quantity supplied exceeds the quantity demanded
• Excess supply a situation where the quantity at a particular price exceeded the quantity demanded at that price
• Shortage a situation where quantity demand exceeds quantity supplied
• Excess demand a situation where the quantity demanded at a particular price exceeds the quantity supplied at that price
• Equilibrium price the one price where the quantity supplied equals the quantity demanded; neither a surplus nor a shortage exists in at the equilibrium price; all exchanges desired at this price can be completed

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