Flashcards in 3. Markets Deck (13):
a situation where buyers and sellers are in contact for purposes of exchange.
Role: to allow the interests of buyers (demand) to interact with the interests of sellers (supply) in order to achieve equilibrium.
a financial market structure that consists of having all orders routed to one central exchange w/ no competing market (e.g. syd fish markets)
a market structure that consists of a network of various technical devices that enable investors to create a marketplace without a centralised location (e.g. stock market, foreign exchange)
the quantity of a good/ service that consumers are willing to and able to buy
a graphical representation of the quantities of a good/service that consumers are willing and able to buy along the range of possible prices
law of demand
the quantity demanded of a good or service is inversely related to its price
factors influencing demand
1. Own price (moves along graph)
3. Prices of substitutes and compliments
5. Expected future prices
7. Distribution of income
holding other things constant" and is usually rendered in English as "all other things being equal".
Price elasticity of demand
Sensitivity of the quantity demanded to a change in its price.
PRICE ELASTICITY OF DEMAND = %CHANGE IN QUANTITY (ABSOLUTE) / % CHANGE IN PRICE
strong response to a change in price (people consume much less when prices rise)
E > 1 Elastic
weak response to a change in price e.g. heart medication, toilet paper, petrol
when a change in price is met with a proportionate change in demand
E = 1 unit elasticity