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2-Economics- Micro > 1.2- Price Determination In A Competitive Market > Flashcards

1.2- Price Determination In A Competitive Market Flashcards

1
Q

Demand

A

-amount of a good/service that an individual is willing and able to buy at a given price over a given period of time

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2
Q

Demand curve

A

-price against quantity demanded
-goes down

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3
Q

Extension

A

-fall in price causes a movement along the curve- going along

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4
Q

Contraction

A

-movement going back up curve

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5
Q

What causes movements

A

Only a change in the price of the good

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6
Q

Factors affecting demand

A

(Pirates CS)
Population
Income
Real interest rates
Advertising
Tastes/trends
Economic conditions
Substitutes

Complementary goods(prices)
Substitute goods(prices

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7
Q

Complementary goods

A

-goods purchased with a product
Eg. Petrol for a car

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8
Q

Substitute goods

A

-replacement product
-eg. Apple vs samsung phones

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9
Q

If an increase in demand- curve…

A

Shifts right

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10
Q

Decrease in demand curve…

A

Curve shift left

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11
Q

Consumer surplus

A

-difference between what someone is willing to pay and actual market price

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12
Q

Supply

A

Amount of goods/services a producer is willing and able to offer for sale at a given price in a given period of time

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13
Q

Supply curve

A

-higher the price/greater the quantity suppplied
-positive relationship
Curve goes up

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14
Q

Factors affecting supply

A

Pintswc

Productivuty
Indirect taxes
Number of firms
Technology
Subsidies-short term
Weather-favourable conditions mean increase agricultural products
Cost of production

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15
Q

Producer surplus

A

The difference between what a producer is willing to supply at and the actual market price

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16
Q

Equilibrium price

A

-price at which the quantty demanded is equal to the quanity supplied
-price where the market clears, no tendancy for change at this price

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17
Q

Excess demand

A

-when prices are low
-more demand than supply

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18
Q

Excess supply

A

-when price high
-more supply than demand

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19
Q

How to go through supply and demand q

A

-shift of curves
-affect demand or supply
-left or right
-what is the magnitude
-any movements on other curve

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20
Q

Interrelated markets

A

-events in one market can affect price in another market if they are interrelated

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21
Q

When drawing interrelated market graphs

A

Draw graph changed first first

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22
Q

Derived demand

A

-good needed for production or consumption of another good
-eg. Wheat needed for wheatabix

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23
Q

Joint demand

A

-demand for one product is directly and positively related to market demand for a related goods/service
-complementary goods
-eg. Fish and chips

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24
Q

Competitive demand

A

-other services/products available that compete
consumer can choose
-substitutes
-samsung and apple phones
-as price of one increases, the demand for other increases

25
Q

Composite demand

A

-increase in demand for one good will affect the supply left to make the other good
-good has 2 or more distinct uses
-eg. Wood for tables and chairs

26
Q

Joint supply

A

-occurs when increase in supply necessarily increases supply of other
-eg. Beef and leather

27
Q

PES

A

-price elasticity of supply
-measures the proportionate responsiveness of suply to the change in price
-positive- as direct relationship between price and supply

%change in supply/%change price (swans/plankton)

28
Q

Elastic PES

A

Touch y axis

29
Q

Inelastic pes

A

Touch x axis

30
Q

Unitary pes

A

Through the origin
=1

31
Q

Perfectly inelastic

A

Vertical line from x axis

32
Q

Perfectly inelastic

A

=0
-factors operating at max capacity
-in short term- fixed at no. Seats at football stadium
-one off- art
-horizontal line from y axis

33
Q

Factors affecting pes (list)

A

Time period
Existance of spare capacity
Ease of storing supply
Length of production period

34
Q

Time period- how affect pes

A

Shorter tiem period- more diff for firms to shift from making one product to another

35
Q

Existance of spare capacity- affecting pes

A

Increase capacity in industry, easier should be to increase output if price increases
-supply more elastic

36
Q

Ease of storing stock-how affect pes

A

-if easier to store- price increase, firms sell stocks so supply more elastic

37
Q

Length of production period- affect pe

A

Quicker good to produce- easier to reproduce at a change in price

38
Q

Short term supply

A

-increase in price, increase profts to be made
-increased incentive for firms to increase output
-firms increase output, hiring mpre variable factors of production eg. Labour
-more elastic than market supply period

39
Q

Long run supply

A

-if firms increase demand for long lasting, may increase q&q factors of production by employing more capital and labour
-more elastic than short run

40
Q

Market supply period

A

-situation facing firms following a switch in unexpected rightward shift of demand
-firms cannot immediately increase output
-supply increasingly inelastic- price increasingly eliminate excess demand

41
Q

Cross elasticity of demand

A

Measures the proportionate responsiveness of demand for good x to a change in price for good y
-shows relationship between 2 goods

%change demand x/%change price y

42
Q

Complementary goods- ced

A

Ced negative
-joint demand
-fish and chips

43
Q

Substitute- ced

A

Competitive demand
Ced positive- postitutes
-coke and pepsi

44
Q

Ced=0

A

No relationshoip
Verticle line x axis
No change in demand in x for change in price in y

45
Q

Income elasticity of demand

A

Measures the proportionate responsiveness of demand to a change in income
Shows types of goods

%change demand/%change income

46
Q

Normal goods

A

Positive yed
As y increases so does demand
-eg clothes

47
Q

Inferior good

A

Negative ued
Tesco own brand coje
As y increases, d decreases

48
Q

Luxury goods

A

Yed over +1

49
Q

Everyday goods

A

+0-1 YED

50
Q

What would result in an increase in equilibrium price

A

Demand is perfectly elastic and labour costs rise

51
Q

What is a positive statement

A

Able to be tested

52
Q

The income elasticity of demand for bus travel is -1.5 meaning that

A

The bus travel is an inferior good

53
Q

What would an increase in pirce of butter be caused by
Shift left supply and demand

A

A sucessful advertising campaign for a butter substitute and a tax on butter

54
Q

Effective demand

A

The desire for a good or service backed by an ability to pay

55
Q

Condition of demand

A

A determinant of demand other than price, that fixes the position of demand curve
Factors which affect demand

56
Q

Veblen goods

A

Goods of exclusive or ostenetatious consumption
Eg ferrari
Reassuringly expensive

57
Q

Market disequilibrium

A

A situation in which opposing forces are out of balance
Planned demand < planned supply , price falls
Planned demand > planned supply - prices rise

58
Q

Market equilibrium

A

Planned demand = planned supply
Price does not change

2-Economics- Micro (14 decks)

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