macroeconomics chapter 2 Flashcards
equilibrium price
the price at which quantity demanded equals quantity supplied
supply
the quantity of a good or service that firms are willing and able to sell at a given price in a given time period
demand
the quantity consumers are willing to buy
effective demand
the desire for a good or service and ability to pay for it
market demand
the quantity of good or service that all consumers in the market are willing to buy at any price
competitive market
a market with a large number of buyers and sellers and good market information and firms can easily enter/ leave
what causes a movement along demand curve
change in price
demand curve shift right
increase in demand
demand curve shift left
decrease in demand
causes of a shift in demand curve
social trends change in price of substitute goods change in price of complementary goods change in income size of population
normal good
demand increases as income increases
inferior good
demand decreases as income increases
Price elasticity of demand (PED)
A measure of the responsiveness of the quantity of a good demanded to changes in its price
factors effecting price elasticity of demand
substitutability percentage of income necessity or luxury time cost of changing to a new good brand loyalty
income elasticity of demand
a measure of the responsiveness of quantity demanded of a good to changes in income
cross-price elasticity of demand
a measure of the responsiveness of quantity demanded due to changes of price of another good
market supply
the quantity that all firms plan to sell at a given price in a given time period
shifts in supply curve
costs of production technical progress taxes subsidies entry of new producers
price elasticity of supply
a measure of how much quantity supplied responds to a change in price of that good.
factors determining elasticity of supply
length of production period spare capacity ease of accumulating stocks number of firms in market more firms more elastic time ease of switching production methods
disequilibrium
when quantity demanded does not equal quantity supplied leading to excess supply or demand
joint supply
when more than one product can be made from the same raw material
competing supply
when raw materials are used to produce one good and cant make another good
complimentary good
a good that is consumed with another good