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ECO1017 > Market forces of supply and demand > Flashcards

Market forces of supply and demand Flashcards

1
Q

Define market

A

Group of buyers and sellers in a particular (be specific) good or service

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2
Q

Define competitive market

A

Involves many buyers and sellers

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3
Q

What sort of impact does a competitive market have?

A

Negligible impact- not a monopoly

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4
Q

What do supply and demand determine?

A

Prices in a market economy and in turn how the scarce resources are allocated

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5
Q

What is a monopoly?

A

This is where a single buyer or seller has the power to control the market

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6
Q

What is the demand relationship?

A

This is the relationship between own price and quantity demanded when all other things are equal.

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7
Q

What is the law of demand?

A

The claim that, all other things equal, the quantity demanded of a good falls when the price rises.

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8
Q

What type of good is the law of demand not the case for?

A

Giffen goods

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9
Q

What do the demand schedule table and the demand curve graph show?

A

The relationship between price and quantity

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10
Q

What does market demand refer to?

A

The sum of all individual demands for a particular good or service

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11
Q

What is always on the vertical line of the demand curve?

A

Price

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12
Q

What is always on the horizontal line of the demand curve?

A

Quantity demanded

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13
Q

In which direction does the demand curve typically slope?

A

Downwards

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14
Q

How is the market demand curve obtained graphically?

A

Individual demand curves are summed horizontally.

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15
Q

What will a tax that raises the price of a good do to the demand curve?

A

It will result in a movement along the curve

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16
Q

What does change in demand refer to?

A

Any change other than own price that alters the quantity demanded at every price

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17
Q

List 6 factors that could cause a change in demand

A 
Price of related goods
Income
Tastes
Number of buyers
Advertising
Expectations
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18
Q

What are the two types of related goods that could affect the demand?

A

Substitutes

Complements

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19
Q

How does the demand for the substitute change if the price increases?

A

If the price of the product increases, the demand for the substitute increases.

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20
Q

Give 3 examples of complements for a phone

A

Apple Care
Phone case
Insurance

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21
Q

What would happen if the price of the leading good increased?

A

The demand for both the leading product and for the complements would decrease.

22
Q

What are the two types of good that a change in income can affect?

A

Normal and inferior goods

23
Q

How will a higher income affect demand?

A

A higher income means that the higher end product can be bought so normal goods are bought rather than inferior ones

24
Q

How does the demand for normal goods change?

A

It changes in the same direction as income change

25
Q

How does the demand for inferior goods change?

A

It changes in the opposite direction as income.

26
Q

Define inferior good

A

A good for which, all things equal, an increase in income leads to a decrease in demand

27
Q

Define normal good

A

A good for which, all things equal, an increase in income leads to an increase in demand.

28
Q

In what direction does the demand curve shift if there is an increase in demand?

A

It shifts to the right and the price increases

29
Q

In what direction does the demand curve shift if there is a decrease in demand?

A

It shifts to the left and the price decreases

30
Q

In what direction does the demand curve for a normal good change if the income increases?

A

It shifts to the right and the price and demand for the good increases.

31
Q

In what direction does the demand curve for an inferior good change if the income increases?

A

It shifts to the left and demand for the good decreases.

32
Q

What is the supply relationship?

A

This is the relationship between own price and quantity supplied, all things equal.

33
Q

What is the law of supply?

A

All other things equal, the quantity supplied of a good increases when the price of the good rises.

34
Q

In what direction is the supply curve if the law of supply is being followed?

A

It is upward sloping

35
Q

What does market supply refer to?

A

The sum of all individual supplies for all sellers of a particular good or service.

36
Q

How is the market supply curve obtained graphically?

A

Individual supply curves are summed horizontally

37
Q

What does a change in supply refer to?

A

A change in a determinant other than own price

38
Q

What are 6 things that can cause a change in supply?

A

Profitability of other goods in production and prices of goods in joint supply
Technology
Natural/ social factors
Input prices
Expectations of producers about the future state of the market
A change in the number of sellers in the market

39
Q

Give two examples of natural and social factors

A

Weather

Changing attitudes

40
Q

What are input prices?

A

These are the prices of the factors of production

41
Q

What happens to the supply curve if there is a decrease in supply?

A

It shifts to the left and the price increases

42
Q

What happens to the supply curve if there is an increase in supply?

A

It shifts to the right and the price decreases.

43
Q

What is meant by equilibrium price?

A

This is the price that balances quantity supplied and quantity demanded

44
Q

How can you find the equilibrium price graphically?

A

It is the price at which the supply and demand curve intersect.

45
Q

What is meant by equilibrium quantity?

A

The quantity supplied and the quantity demanded at the equilibrium price.

46
Q

How can you find the equilibrium quantity graphically?

A

It is the quantity at which the supply and demand curves intersect

47
Q

Where can the surplus be found on a graph?

A

In the region above where the demand and supply curves intersect up until the line

48
Q

Where can the shortage be found on a graph?

A

In the region below where the demand and supply curves intersect up until the line

49
Q

What is the main function of price in a free market?

A

To act as a signal to both buyers an sellers

50
Q

What does the price tell buyers?

A

What needs to be given up (usually money) in order to aquire benefits

51
Q

What does the price tell sellers?

A

It is a signal in relation to the profitability of production

52
Q

What is the law of supply and demand?

A

The claim that the price of any good adjusts to bring the quantity demanded for that good into balance.

ECO1017 (16 decks)

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