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Flashcards in Micro - Demand Deck (29)
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1
Q

What is a market

A

A Market is any arrangement by which buyers and sellers come together to exchange goods and services which are scarce and can be therefore be priced

2
Q

What is a free market

A

It is one that is free from government interference or intervention

3
Q

What do free markets operate on

A

The basis of demand and supply

4
Q

What causes quantity to change when prices move

A

Income effect, Less able

Substitution effect, Less willing

5
Q

What is demand

A

It is the quantity of a good or service that consumers are wiling and able to buy at any particular price`

6
Q

What is a contraction

A

It is the increase in price which causes the decrease in quantity

7
Q

What is a extension

A

It is the lowering of a price which then increases the quantity

8
Q

What factors affect demand

A

Income of consumers
Price of substitutions
Price of complements
tastes and preferences
Population size and structure
cost and availability of credit

9
Q

What does ceteris paribus mean

A

That all the other factors that affect demand are unchanged

10
Q

What is a movement on a demand curve

A

It is the point moving up and down the curve

11
Q

What causes movement

A

Change in price of the good/service itself

12
Q

What is the effect of a movement

A

A change in quantity demanded

13
Q

What is a shift

A

The movement of the whole demand curve

14
Q

What causes a shift

A

A change in any other factors

15
Q

What is the effect of a shift

A

A change in demand at all prices

16
Q

What are substitutes

A

Goods that are in competition
Two goods/services in competitive demand

17
Q

What are complements

A

Goods that are bought together
Two goods and services in joint demand

18
Q

What is Revenue

A

It is the income by a firm from the sale of its output

19
Q

Formula for Total Revenue

A

= price per unit x numbers of unit sold

20
Q

How to know whether you should change prices

A

As long as extra revenue earned from loyal customers who continue to purchase the good is greater than the revenue lost from those customers who no longer purchase then TR rises

21
Q

What is Profit

A

The extra money earned after subtracting revenue from costs

22
Q

What are the types of demand

A

Individual
Market
Joint
Competitive
Derived
Composite
Exceptional

23
Q

What is individual demand

A

The quantity of a good or service that an individual consumer is willing and able to buy at different prices

24
Q

What is Market demand

A

The total quantity of a good or service bought by all consumers in a particular market at different prices

25
Q

What is joint demand

A

When two goods are bought together as complements

26
Q

What is competitive demand

A

When two goods are rivals or substitutes for consumer spending

27
Q

What is derived demand

A

When the demand for a factor of production is the direct result of the demand for the output it produces

28
Q

What is composite demand

A

When the demand for a factor of production is composed of multiple different areas of individual demand

29
Q

what is exceptional demand

A

When/if the demand for a good defies the law of demand so that price and demand are positively related