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