Analysis describing relationships of cause and effect. Normative analysis
Analysis examining questions of what ought to be. Arbitrage
Practice of buying at al low price at one location and selling at a higher price in another. Perfectly competitive
Market with many buyers and sellers, so that no single buyer or market
seller has a significant impact on price.
Price prevailing in a competitive market.
Extent of market
Boundaries of a market, both geographical and in terms of range of products produced and sold within. Nominal price
Absolute price of a good, unadjusted for inflation. Real price
Price of a good relative to an aggregate measure of prices; price adjusted for inflation. Consumer price index
Measure of the aggregate price level.
Producer price index
Measure of the aggregate price level for intermediate products and wholesale goods. Chapter 2
Relationship between the quantity of a good that producers are willing to sell and the price of the good. Demand curve
Relationship between the quantity of a good that consumers are willing to buy and the price of the good. Substitutes
Two goods for which an increase in the price of one leads to an increase in the quantity demanded of the other. (example beef and chicken) Complements
Two goods for which an increase in the price of one leads to a decrease in the quantity demanded of the other. (example gasoline and cars) Equilibrium (or market
Tendency in a free market for price to change until the clearing price)
Tendency in a free market for price to change until the market clears. Surplus
Situation in which the quantity supplied exceeds the quantity demanded. Shortage
Situation in which the quantity demanded exceeds the quantity supplied. Elasticity
Percentage change in one variable resulting from a 1-percent increase in another. Price elasticity of demand
Percentage change in quantity demanded of a good...
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