Demand + Supply Flashcards
(23 cards)
Define demand
Quantity of goods and services that household are willing and able to buhy at each price.
What is derived demand?
When demand for one product drives the demand for another.
Define Ceteris Paribus
All other influencing factors are held constant.
State the six factors that cause a shift in demand.
- Substitute
- Complements
- Season
- Fashion
- Government legislation
- Income
What is a normal and inferior good?
Normal - income increases as demand increases (consumers can afford the product)
Inferior - income increases and demand decreases (consumers less willing to buy)
Define supply
Quantity of goods and services that all firms in a particular market are willing and able to produce and sell at each price.
What is individual supply?
Individual - a producer’s supply of a good or service.
State the seven factors as to why the supply curve may shift.
- Production
- Indirect tax
- Number of firms
- Technology
- Subsidy
- Weather
- Cost of production
What is the price mechanism?
Interaction of buyers and sellers in free markets enabling goods, services and resources to be allocated efficiently.
Competitive markets
Markets with large numbers of buyers and sellers, with low barriers to entry and exit
Complementary goods
Goods in joint demand, often bought together
Composite demand
Demand for a multi-purpose good
Condition of demand
Determinant of demand other than the good’s price, that sets the position of the good’s demand curve
Condition of supply
Determinant of supply other than the good’s price, that sets the position of the good’s demand curve
Customer sovereignty
Consumers can collectively govern production in a market vis exercising spending power. Strongest in perfectly competitive markets.
Effective demand
Desire for a good or service that is backed by the ability to pay for said good or service
Excess demand
When consumers want to buy more than producers are willing to sell, occurs below equilibrium price
Excess supply
When producers want to sell more than consumers are willing to buy, occurs above equilibrium price
Inferior good
A good for which demand rises as income falls
Joint supply
When one good is produced, another good is also produced from the same raw materials
Normal good
A good for which as demand rises, income falls.
Producer sovereignty
Producers determine what is produced and the prices charged
Substitute good
A good in competing demand; a good that can be used in place of another similar good
