Supply and Demand
the economic term for the willingness and ability of consumers to purchase a good or service at a given price
Demand
What concept measures the responsiveness of quantity demanded to a change in price?
Price elasticity of demand
What market structure features many small firms, identical products, and no barriers to entry?
When the free market fails to achieve an efficient allocation of resources, what is this called?
Market failure
What is a government payment to producers to encourage production or lower prices?
Subsidy
What happens to the demand curve for normal goods when consumer income increases?
It shifts right
If a good has a PED of 0.8, is its demand considered elastic or inelastic?
Inelastic
What is the term for a market dominated by a single seller?
Monopoly
What type of externality occurs when the production of a good harms a third party not involved in the transaction?
Negative externality
What type of government-imposed price control sets a maximum legal price?
Price ceiling
What does the law of supply state about the relationship between price and quantity supplied?
Direct relationship
What type of relationship between two goods does a negative Cross-Price Elasticity of Demand (XED) indicate?
Complements
In which market structure do firms engage in significant non-price competition due to product differentiation?
Monopolistic competition
What two characteristics define a public good?
Non rivalrous and non excludable
What is the primary purpose of imposing an indirect tax on goods with negative externalities?
To internalize the externality/reduce welfare loss
What is the specific point where the quantity demanded equals the quantity supplied?
Equilibrium
If a firm increases the price of a product with elastic demand, what happens to its total revenue?
Decreases
What is the defining characteristic of an oligopoly regarding the number of dominant firms?
Few large firms
What problem arises with public goods because individuals can benefit without paying for them?
What is a potential unintended consequence of setting a price floor above the equilibrium price?
Surplus
If the price of a complement good decreases, what is the immediate impact on the demand for the original good?
Demand increases
What factor primarily explains why Price Elasticity of Supply (PES) tends to be higher in the long run than in the short run?
Time
What type of profit do perfectly competitive firms earn in the long run?
Normal Profit
What is the specific term for the loss of social welfare due to market inefficiency, often depicted as a triangle on a diagram?
Deadweight loss
What market-based policy allows firms to buy and sell rights to pollute?
Tradable permits