Chap 2 Flashcards
(29 cards)
what is demand ?
demand refers to various quantities of goods
and/or services that a consumer is willing and able to purchase at a given price during a particular time, given other things unchanged
what does the law of demand say ?
It states that when the price of a commodity and its quantity demanded are inversely related
what’s a demand schedule ?
its the combination of the list of a commodity’s price and quantity in the form of a table.
What’s a demand curve ?
Its a graphical representation of the relationship
between different quantities of a commodity demanded by an individual at different prices per time period.
Whats demand function and the formula?
its a mathematical relationship between price and
quantity demanded, all other things remaining the same.
Qd= f(P)
Whats market demand?
It refers to the sum of the quantity demanded for the product by all buyers at each price.
What are the 2 factors that determine the demand for a good?
- price factor
- Non price factor
What are the 5 non price factors ?
- taste or preference
- income demand
- cross demand
- consumer expectation of the price
- nbr of buyers in the market
whats Movement along demand curve
it means that a fall or raise price leads to a raise or fall in quantity demanded
whats a shift in the demand curve ?
it occurs due to other factors rather than the price of a given commodity
Define Elasticity
its a measure of responsiveness of a dependent variable to changes in an independent variable
what is Elasticity of demand ?
it refers to the change in the quantity demanded of a good to a change in its price, change in income, or change in prices of related goods.
what are the 3 kinds of demand elasticity ?
- Price elasticity
- income elasticity
- cross elasticity
what does price elasticity mean?
what’s the formula of price elasticity of demand ?
it means how much demand will change when price changes.
% change in Qd / % change in price
What is Arc elasticity ?
What’s the formula of arc elasticity of demand ?
Its the old and new price and quantity
Ed = (change in Qd / OG Q ) / (change in P/OG p )
What are the determinants of price elasticity of demand ?
- Availability of substitutes
- Time
- the proportion of income consumers spend for a product
- the importance of the commodity in the consumers budget
whats income elasticity of demand ?
Its a measure of the change in quantity demand to changes in income while all other things are constant.
How is the income elasticity of normal goods and inferior goods?
the income elasticity of normal goods is positive
for inferior goods its negative
Cross price Elasticity of demand
How much a commodity is demanded when there is a change in the prices of other commodities
How is the cross price elasticity of demand for substitute goods
complementary goods
unrelated goods
substitute goods : positive
complementary goods : negative
unrelated goods : zero
What is supply ?
Supply indicates the quantity of products that sellers are able and willing to provide at different prices.
what does the law of supply say?
it states that as the price of the product increases the quantity supplied also increases.
what is market supply?
it is the sum of the quantity supplied of the product by all sellers at each price.
What is elasticity of supply?
what is the formula of elasticity of supply?
it is how much supply will be change when price changes
Es = %change in quantity supplied / %change in price
