Essay on Economics: Supply and Demand and Market-clearing Price Quantity

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Cost: The disadvantages of a particular course of action, measured by bad feelings, money, or numbers of items
Complements: Goods and/or services that are often consumed together Ex: left and right socks, tennis rackets and tennis lessons
Benefit: The advantages of a particular course of action, measured by good feelings, money, or number of items
Competition: attempts by two or more individuals or organizations to acquire the same goods, services, or resources. Consumers compete with other consumers for goods and services. Producers compete with other producers for sales (Market Structure)
Markets: Places, institutions, or technological arrangements where or by means of which goods or services are exchanged
Demand: A schedule (or graph) showing how many units of a good or service buyers are willing and able to buy at all possible prices during a period of time
Substitute: A good or service that may be used in place of another good or service Ex: tap water for bottled water, movies for concerts, etc.
Supply: A schedule (or graph) showing how many units of a good or service producers are willing and able to sell at all possible prices during a period of time
Choice: Course of action taken when faced with a set of alternatives
Invisible Hand: A figure of speech representing the idea that firms and individuals making decisions in their own self-interest will at a time create economic order and promote society’s interests; coined by Adam Smith
Incentives: Any reward or benefit, such as money or good feeling, that motivates choices and behaviors
Secondary Effects: Effects indirectly related to a course of action whose influence will only be seen or felt later in time
Price: The amount of money that people pay when they purchase a good or service; the amount they receive when they sell a good or service
Consumer Surplus: The difference between the price a consumer would be willing to pay for a good or service and what the consumer actually had to pay
Price Elasticity of Supply and Demand: The responsiveness of the quantity demanded if a good or service to changes in its price. Demand- percent change in quantity demanded divided by the percent change in price. Supply- percent change in quantity supplied divided by the percent change in price
Determinants of Demand: Factors other than the price that change (shift) the demand schedule, causing consumers to buy more or less at every price. Factors include income, number of consumers, preferences, and
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