price determination key terms

Question 2

effective demand

Answer 2

desire and ability of consumers to purchce goods and services at a given price level?

Question 3

market demand

Answer 3

total quantity of a product or service that all customers in a specific market are willing to be able to purchase at a given price level.

Question 4

individual demand

Answer 4

quantity of a good or service that an individual consumer is willing or able to purchase at various price levels.

Question 5

condition of demand

Answer 5

the various factors that influence the quantity of product or service that consumers are willing and able to purchase other than price levels

Question 6

substitute goods

Answer 6

products or services that can be used in place of each other to satisfy similar needs or wants.

Question 7

complementry goods

Answer 7

products or services that are typically used together to satisfy a common need or want.

Question 8

normal good

Answer 8

a good which demand increases as income rises and demand decreases as income falls

Question 9

inferior good

Answer 9

a good for which demand decreases as income rises and demand increases as income falls

Question 10

market supply

Answer 10

total quantity of a good or service that all suppliers are willing and able to offer for sale at different prices in a given market.

Question 11

profit

Answer 11

the difference between total sales revenue and total costs of production.

Question 12

condition of supply

Answer 12

the various of the factors that influence the quantity of a good or service that supplies are willing and able to provide

Question 13

market of supply

Answer 13

a market is in equilibrium when planned demand equals planned supply where the demand curve crosses the supply curve

Question 14

market disequlibrium

Answer 14

exist at any price other than the equilibrium price when either planned demand is less than planned supply or planned demand is more than planned supply

Question 15

excess supply

Answer 15

when firms wish to sell more than consumers wish to buy, with the price above equilibrium price

Question 16

excess demand

Answer 16

when consumers wish to buy more than firms wish to sell the price below the equilibrium price

Question 17

joint supply

Answer 17

when one good is produced of a good is also produced from the same materials perhaps as a by product

Question 18

composite demand

Answer 18

demand for a good witch has more than one use which means that an increase in demand for one use of the good reduces the supply of the good for an alternative use it is related to the concept of competing supply

Question 19

derived demand

Answer 19

demand for good or factor of production wanted not for its own sake but as a consequence of the demand for something else

Question 20

joint demand

Answer 20

A situation where two or more goods are demanded together because they are used together and complement each other

Question 21

Rationing function

Answer 21

rising prices to ration demand for a product, Or decreasing prices to Ration supply

Question 22

Signalling function

Answer 22

Prices provide information to buyers and sellers

Question 23

Incentive function

Answer 23

Prices create incentives of people To alter their economic behaviour for example a higher price creates an incentive for firms to supply more of a good or service

Question 24

Allocative function

Answer 24

Changing relative prices allocate scarce resources away from markets exhibiting excess supply and into markets in which that is excess demand

Question 25

Inelastic demand

Answer 25

The quantity demanded is not a very responsive to changes in price, even if the price increases or decreasing demand remains the same / stable this includes necessity items where there is limited substitutes

Question 26

Elastic demand

Answer 26

This is where quantity demanded of a product or service is highly responsive to changes in prices if the price of the product increases the demand decreases and vice versa this is why there is many substitutes and products are non essential

Question 27

Price elasticity of demand

Answer 27

measures the responsiveness of quantity demanded given a change in price

Question 28

Perfectly priced inelastic

Answer 28

Regardless of the price changing quantity demanded won’t change Lifesaving medicines, addictive substances they’re not essential but people will still be willing to pay if there is an increase in price

Question 29

Perfectly priced elastic

Answer 29

In extreme examples a change in price will have an infinitely large change in quantity demanded ,consumers are highly responsive and are not willing to pay at a higher price For example clothes, electronics there is many substitutes

Question 30

Unitary elastic

Answer 30

The value of ped is exactly one

Question 31

Income elasticity of demand

Answer 31

y E D- Measures the responsiveness of quantity demanded given a change in income

Question 32

Necessities

Answer 32

goods/services that are considered essential for basic needs and are required for a daily living

Question 34

Cross elasticity of demand

Answer 34

Is the responsiveness of a change in demand of one good (x) To a change in the price of another good(y)

Question 35

Complementary goods

Answer 35

Have a negative cross elasticity of demand if one good becomes more expensive the quantity demanded for both goods will fall

Products or services that are consumed together or used in conjunction with each other for example printer and ink cartriges

Question 36

Substitutes

Answer 36

Can replace another good They cross elasticity of demand is positive and the demand curve is upward sloping if the price of one brand of a tv increases consumers might switch to another brand

Goods or services that can be used in place of each other for a similar purpose or need e.g., coke and pepsi

Question 37

Price elasticity of supply

Answer 37

Measure the responsiveness of quantity supplied to a change in price, reflects the ability of producers to change the output following a change in demand

Question 38

demand

Answer 38

Quantity of a good or service that a consumer is willing and able to buy at given price in a particular time.

Question 39

Supply

Answer 39

Quantity of a good or service that firms are willing and able to sell at a given price at a particular time

Question 40

total revenue

Answer 40

price X quantity sold