Supply & Demand
All 28 Supply & Demand terms in the AP Economics glossary — each with a clear, exam-accurate definition. Tap any term for the full explanation, formula, and related interactive graph.
Change in demand is a shift of the demand curve, while change in quantity demanded is a movement along the demand curve.
Complementary goods are goods that are typically used or consumed together.
Consumer surplus is the difference between the maximum price a consumer is willing to pay and the actual price they pay.
Deadweight loss is the loss of total surplus that occurs when a market is not at its efficient competitive equilibrium.
Demand is the willingness and ability of consumers to buy different quantities of a good at different prices, holding all else constant.
Determinants of demand are factors that shift the demand curve, changing the quantity demanded at each price.
Determinants of supply are factors that shift the supply curve, changing the quantity supplied at each price.
The equilibrium price is the price at which quantity demanded equals quantity supplied.
An excise tax is a tax levied on the production or sale of a specific good or service.
An inferior good is a good for which demand decreases as consumers' income rises and increases as income falls.
The law of demand states that quantity demanded falls when price rises, holding all else constant.
The law of supply states that quantity supplied rises when price rises, holding all else constant.
Market equilibrium occurs when quantity demanded equals quantity supplied at a given price.
A normal good is a good for which demand increases when consumer income rises and falls when income decreases.
A price ceiling is a government-imposed maximum price that can be charged for a good or service.
A price control is a government-imposed limit on how high or low a price can be for a particular good or service.
A price floor is a government-imposed minimum price that must be paid for a good or service.
Producer surplus is the difference between the minimum price a producer is willing to accept and the actual price they receive.
Quantity demanded is the amount of a good or service consumers are willing and able to purchase at a given price.
Quantity supplied is the amount of a good or service producers are willing and able to offer for sale at a given price.
A shortage occurs when quantity demanded exceeds quantity supplied at a given price.
A subsidy is a government payment to producers to lower production costs and encourage output.
Substitute goods are goods that can be used in place of each other to satisfy a particular need or want.
Supply is the willingness and ability of producers to sell different quantities of a good at different prices, holding all else constant.
A surplus occurs when quantity supplied exceeds quantity demanded at a given price.
Tax incidence refers to the distribution of the tax burden between buyers and sellers.
Total surplus is the sum of consumer surplus and producer surplus.
A price control is binding only when it forces price away from equilibrium: a binding ceiling sits below equilibrium (causing shortages) and a binding floor sits above it (causing surpluses).