1.2.3 markets

Question 1

market equilibrium

Answer 1

state of equality or balance between market demand and market supply

Question 2

supply

Answer 2

the amount of product or service that a business is willing and able to provide at a given price

Question 3

demand

Answer 3

the amount of product or service that customers are willing and able to buy at a given price

Question 4

market clearing price

Answer 4

• the interaction of buyers and sellers will provide an equilibrium price in a market where demand and supply is equal.
• the point where the supply curve meets the demand curve is the equilibrium point.

Question 5

surplus

Answer 5

where supply exceeds demand then there is a surplus.
may be due to the price being too high.

Question 6

shortage

Answer 6

where demand exceeds supply there will be a shortage.
this may be because the price being charged is too low.

Question 7

how a price increase affects the supply curve

Answer 7

• as prices increase this causes movement along the supply curve.
• as prices increase- suppliers want to supply more of a product or service

Question 8

how a price decrease affects the supply curve

Answer 8

• as prices decrease then this causes movement down the supply curve.
• as prices decrease- suppliers want to supply less of a product or service.

Question 9

how non-price factors can affect the supply curve: increase in supply (surplus)

Answer 9

an increase in the level of supply (due to non-price factors) means that the whole supply curve shifts to the right

Question 10

how non-price factors can affect the supply curve: decrease in supply (shortage)

Answer 10

a decrease in the level of supply (due to non-price factors) means that the whole supply curve shifts to the left

Question 11

how a price increase affects the demand curve

Answer 11

an increase in demand from customers will cause movement to the left along the demand curve

Question 12

how a price decrease affects the demand curve

Answer 12

a decrease in demand from customers will cause movement to the right along the demand curve

Question 13

how non-price factors can affect the demand curve: increase in demand

Answer 13

an increase in demand (due to non-price factors) means that the whole demand curve shifts to the right

Question 14

how non-price factors can affect the demand curve: decrease in demand

Answer 14

a decrease in demand (due to non-price factors) means that the whole demand curve shifts to the left

Question 15

supply curve

Answer 15

a line to plot the relationship between price and quantity supplied

Question 16

demand curve

Answer 16

a line to plot the relationship between price and quantity demanded

Question 17

normal good

Answer 17

products where an increase in consumers income means and increase in demand

Question 18

inferior good

Answer 18

products where an increase in consumers income means a decrease in demand

Question 19

subsitute good

Answer 19

an alternative product used to satisfy a want

Question 20

complementary good

Answer 20

products that may be used together