Foundational AP Microeconomics vocabulary spanning supply, demand, market structures, and factor markets. Front: the term. Back: a plain-language definition.
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- Law of Demand
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As the price of a good falls, the quantity demanded increases, all else equal- Law of Supply
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As the price of a good rises, the quantity supplied increases, all else equal- Equilibrium Price
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The price at which quantity demanded equals quantity supplied- Shortage
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A situation where quantity demanded exceeds quantity supplied at a given price- Surplus
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A situation where quantity supplied exceeds quantity demanded at a given price- Demand Curve
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A graph showing the inverse relationship between price and quantity demanded- Supply Curve
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A graph showing the positive relationship between price and quantity supplied- Price Ceiling
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A government-imposed maximum price for a good or service- Price Floor
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A government-imposed minimum price for a good or service- Price Elasticity of Demand
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A measure of how responsive quantity demanded is to a change in price- Elastic Demand
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Demand where a small percentage change in price causes a larger percentage change in quantity demanded- Inelastic Demand
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Demand where a change in price causes a smaller percentage change in quantity demanded- Income Elasticity of Demand
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A measure of how responsive quantity demanded is to a change in consumer income- Cross-Price Elasticity of Demand
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A measure of how responsive quantity demanded of one good is to a change in the price of another good- Perfect Competition
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A market structure with many firms, homogeneous products, free entry and exit, and perfect information
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