1.4 external Flashcards
To study effectively for the 1.4 economics external for year 11 NCEA (28 cards)
Market
Any place or situation where buyers and sellers interact to exchange good or services
Price determinants
can be set by the seller, government, bids, tender, auction or negotiation
how can buyers and sellers communicate?
Fax, phone, face-to-face, email, letter.
What does mutually reliant mean?
interdependent
qualities and characteristics of money.
convenient, easy-to-carry, long lasting, able to be used a number of times, divisible, acceptable, limited in supply- valuable, be recognizable
money functions
acts as a medium of exchange, standard of value or unit of account, means of deferred payment, store of value.
Non-market activity
exchanges that take place without the aid of money e.g. green dollar exchange
market demand
The horizontal summation of all individual demand curves and schedules at each price
market supply
The horizontal summation of all individual supply curves and schedules at each price
determinants of pe and qe
the interaction of the forces of demand and supply
when does shortage occur?
at any price below the equilibrium
At the equilibrium what happens?
the market will clear no shortage or surplus will occur.
when does surplus occur?
at any price above the equilibrium.
market reaction to shortage?
consumers bid up price. price increases, Quantity supplied Increases and Quantity demanded decreases
what is a price control?
imposed by the government so that price cannot automatically return to the equilibrium as it would in a free market as laws and regulations prohibit it.
what is a minimum price control?
when the price is not allowed to fall below a certain point. Set above the equilibrium.
what does a minimum price control result in?
excess supply, must stock pile. Used to protect producers from unreasonably low prices for their output.
What is a maximum price control?
Set below the equilibrium. Prevents price rising above this limit.
What does a maximum price control result in?
Creates a shortage and possible black market . Price could be on ration cards or 1st come 1st serve basis.
What is a subsidy?
A payment made by the government to keep costs of production down.
advantages of a subsidy…
no shortage as is with maximum price.
disadvantages of a subsidy…
very expensive for government to maintain.
What is an indirect tax?
A tax collected by a 3rd party and passed on to the government. Leads to decrease in supply.
advantages of an indirect tax
Raises government revenue and decreases the equilibrium quantity
