Knowledge of Markets: Supply and Demand (1)

Question 1

What is a market

Answer 1

A market is a group of buyers and sellers of a particular good or service

Question 2

What is a competitive market

Answer 2

A market with many buyers and many sellers. No single buyer or seller can influence price

Question 3

What is perfect competition

Answer 3

Where the goods are the same and there are many buyers and sellers. No one can influence price

Question 4

What is a monopoly

Answer 4

A single seller of a product or service - the consumer must pay the price listed

Question 5

What is an oligopoly

Answer 5

Small number of sellers, competitors may compete or collude

Question 6

What is individual demand determined by

Answer 6

1. Price - the law of demand states that the quantity demanded is negatively related to price
2. Reasons - income effect, substitution effect

Question 7

What other factors influence demand

Answer 7

1. Income
2. Price of related goods
3. Tastes

Question 8

What is meant by a good being ‘normal’

Answer 8

Quantity demanded rises with income

Question 9

What is meant by a good being ‘inferior’

Answer 9

Quantity demanded falls with income good

Question 10

What are substitutes

Answer 10

When a fall in the price of one good reduces the quantity demanded of another e.g. Netflix vs Film Downloads

Question 11

What are complements

Answer 11

When a fall in the price of one good increases the quantity demand of another e.g. Computers and film downloads

Question 12

What is meant by tastes

Answer 12

Peoples preferences for goods and services change over time, e.g. Fashion