Define the following terms and explain their importance to the study of economics

Question

a. demand
b. surplus
c. equilibrium
d. law of supply and demand
e. quantity demanded

Answer 1

a. Demand is a schedule that indicates how much consumers are willing and able to buy at different prices during a specified period. There may be individual and market demand schedules. Demand is central to the study of a market system.
b. A surplus exists in a market when the price is above the equilibrium, so the quantity supplied is greater than the quantity demanded. A surplus will normally cause the price to fall.
c. Equilibrium is a situation in which there are no inherent forces that produce change. The quantity demanded by consumers is equal to the quantity supplied by sellers. A market is not necessarily always at equilibrium, but we expect it to move toward equilibrium.
d. The law of supply dictates that producers want to sell greater quantities at higher prices; the law of demand dictates that consumers want to buy greater quantities at lower prices. Taken together, the laws of supply and demand suggest that a market will always move toward equilibrium, at which quantity supplied equals quantity demanded. Although there may be cases in which this does not occur, we expect it to be generally true.
e. The quantity demanded of a good or service depends on its price. This is, graphically, one point on a demand curve. Other factors that determine quantity demanded include income of buyers, population size, tastes, and prices of other products (substitutes and complements).