1. Supply and Demand

2. Demand
Law of Demand: economic rule which states that the quantity demanded, and price move in opposite directions
As price goes , quantity demanded goes

3. Supply
Law of Supply: Economic rule which states that an increase in supply leads to a decrease in price while a decrease in supply leads to an increase in price.

4. Law of Diminishing Marginal Utility
Rule stating that the additional satisfaction a consumer gets from purchasing one or more units of a product will be less with each one purchased
Ex: Season tickets vs. one time purchase
Consumers deal with this phenomenon by consuming a variety of goods rather than lots of one good.

5. Real Income Effect
Rule stating that individuals cannot keep buying the same quantity of a product if its price rises and their income stays the same
Ex: Groceries, Gasoline
Also works in reverse
If price decreases and income remains the same, purchasing power is increased, consumer will likely buy more of the product

6. Complimentary vs. Substitute
Complimentary Goods- raw goods that are related in an inverse fashion to other goods
Examples- Gas/Oil, Peanut Butter/Jelly
Substitute Goods- Goods that are in competition.
Examples- Butter/Margarine
Both types of goods are in a direct relationship.

7. Substitution Effect
The economic principle stating that if two items satisfy the same need and the price of one rises, people will buy the other
Ex: Coke/Pepsi

8. Demand Curve
A line plotted on a graph showing the quantity demanded of a good or service at each possible price

9. D

10. Supply Curve
A line plotted on a graph that shows the quantities supplied of a good or service at each possible price

11. S

12. Equilibrium Price
Price of a product or service at which the amount producers are willing to supply is equal to the amount consumers are willing to buy
On a graph it is where the supply and demand curves intersect

14. Shortage and Surplus
Shortage- Quantity demanded is greater than the quantity supplied
Examples- Wii and Xbox were introduced
Surplus- When supply is greater than demand
Examples- As seen on TV products