3 Price Determination In A Competitive Market Flashcards Preview

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Flashcards in 3 Price Determination In A Competitive Market Deck (27):
1

What is demand?

The quantity of a good or service that consumers are able and willing to buy at a given price during a given period of time

2

What's the factors shift of the demand curve?

Population, income, related goods such as substitutes or compliments, advertising, tastes, expectations and seasons

3

What does the downward sloping demand curve show?

The inverse relationship between price and quantity

4

What is price elasticity of demand?

The responsiveness of a change in demand to a change in price

5

Is a price elastic good responsive to change in price?

Yes, the change in price leads to an even bigger change in demand

6

What is a unitary elastic good?

When change in demand is equal to the change in price

7

What is a perfectly inelastic good?

A good start has a demand which does not change when the price changes

8

What is a perfectly elastic good?

demand falls to 0 when price changes

9

What factors influence the price elasticity of demand?

Necessity, substitutes, addictiveness or habitual consumption, proportion of income spent on the good, durability of the good, and peak or off-peak demand

10

What is a subsidy?

Payments from the government to firms to encourage the production of a good and to lower their average costs

11

What is total revenue?

It is equal to average price times quantity sold

12

What is income elasticity of demand?

The responsiveness of a change in demand to a change in income

13

What is an inferior good?

Good we see a fall in demand as income increases

14

What is cross elasticity of demand?

The responsiveness of a change in demand of one good to a change in price of another good

15

What is supply?

The quantity of a good or service that a producer is willing and able to supply at a given price during a given period of time

16

Why are supply curve upwards sloping?

Of price increase, it is more profitable for firms to supply the good, so supply increases
High prices encourage new firms to enter the market because it seems profitable so supply increase
With larger outputa, firm's costs increas, so they need to charge a higher price to cover the costs

17

What factors shift the supply curve?

Productivity, indirect tax taxes, number of firms, technology, subsidies, weather, cost of production

18

What is the price elasticity of supply?

The responsiveness of a change in supply to change in price

19

What is elastic supply?

When firms can increase supply quickly at little cost

20

What is in elastic supply?

When an increase in supply will be very expensive for firms and take a long time

21

What is perfectly elastic supply?

When any quantity demanded can be met without change in price

22

What factors influence price elasticity of supply?

Timescale, spare capacity, level of stocks, how substitutable factors are and barriers of entry to the market

23

What types of demand are there?

Derived demand, composite demand, and joint demand

24

What is derived demand?

When the demand for one good is linked to the demand for a related good

25

What Is composite demand?

When the good demanded has more than one use an example could be milk

26

What Is joint demand?

When goods are brought together such as a digital camera and a memory card

27

What is joint supply?

When increasing the supply of one good causes an increase or decrease in the supply of another good. For examples producing more lamb will increase the supply of wool