Demand and Supply Flashcards
(38 cards)
Define market
a set of arrangements that allows transactions to take place
Define demand
the quantity of a good or service that consumes are willing and able to buy at any possible price in a given period
Define derived demand
demand for a factor of production or a good which derives not from the factor or the good itself, but from the good it produces
Define joint demand
demand for goods which are interdependent, such that they are demanded together
Define composite demand
demand for a good or service that has multiple uses
Define competitive demand
demand for goods which are in competition with each other
What is a sub market
smaller markets that make up a market e.g. market for teachers is a sub market of labour
What are the determinants of demand
price, price of other goods, RDI, consumer tastes and fashion
Demand analysis
The factors that affect individual demand for a good determine the level of demand an individual has for a good. The individual may demand none, one or many units of a good - and this can change over time based on the four factors. A market is made up of many buyers all acting on their individual demand. incomes and preferences very between individuals, and this leads to different prices at which individuals will buy a particular good; some consumers will buy at a higher price, and others will only buy at a lower price. By combining individual demand, we derive market demand.
What is the law of demand
a law that states that there is an inverse relationship between quantity demanded and the price of a good or service, ceteris paribus
Define substitutes
2 goods are said to be substitutes if consumers regard them as alternatives, so that the demand for one good is likely to rise if the price of the other good rises
Define complements
2 goods are said to be complements if people tend to consume them jointly, so that an increase in the price of one good causes the demand for the other good to fall
What is an extension
a movement along the demand curve to the right
What is a contraction
a movement along the demand curve to the left
What is the income effect
ceteris paribus, as a price falls the amount that consumers can buy with their income increases - causing an increase in demand
What is the substitution effect
ceteris paribus, a fall in the price of a good makes it cheaper than before, compared to other goods - this causes an increase in demand for the cheaper good and a decrease in demand for the more expensive good
Demand curve analysis
D curve slopes downwards because marginal utility decreases with each extra good consumed, and therefore the price consumers are willing to pay, for each extra good, decreases. Diminishing marginal utility leads to the law of demand.
Define consumer surplus
the value that consumers gain from consuming a good or service over and above the price paid
Define firm
an organisation that brings together factors of production in order to produce output
Define competitive market
a market in which individual firms cannot influence the price of the good or service they are selling, because of competition from other firms
Define competitive supply
a situation in which a firm can use its factors of production to produce alternative products
Define joint supply
where a firm produces more than one product together
Define composite supply
where a product produced by a firm serves more than one market
Define supply
the amount that a firm is willing and able to supply at a given price
