Price Determination In A Competitive Market Flashcards
(22 cards)
When does market equilibrium occur?
When demand equals supply
What happens to create excess supply?
The price charged for a given good or service is above the equilibrium price
When is a market in equilibrium?
When there is no tendency for the market price to change
What is the equilibrium price in a market?
The market-clearing price
What is competing supply?
When resources can be used to produce one good, OR another good, not both
What are competitive markets?
A market with large numbers of buyers and sellers, with low barriers to entry and exit
What are complementary goods?
Goods in joint demand, these goods are often bought together (eg printers and ink)
What is composite demand?
Demand for a multi-purpose good
What is demand?
The quantity of a good or service that a consumer is willing and able to buy at a given price and time
What is derived demand?
Demand for a good that is the input of another good
What is disequilibrium?
Excess supply or demand in a market
What is effective demand?
Desire for a good or service that is backed by the ability to pay for said good or service
What is elasticity?
The proportionate responsiveness of a second variable to change in a first variable
What is equilibrium?
No excess supply or demand in a market; a state of balance between opposing forces
What is equilibrium price?
The price where planned demand matches planned supply
What is excess demand?
When consumers want to buy more than producers are willing to sell; occurs below equilibrium price
What is excess supply?
When producers want to sell more than consumers are willing to buy; occurs above equilibrium price
What is an exchange?
Trading objects of value, utilising media of exchange
Define income elasticity of demand (YED)
Measures the responsiveness of a goods demand to a change in the incomes of consumers
What is an inferior good?
A good for which demand rises as income falls
What is joint supply?
When one good is produced, another good is also produced from the same raw materials
What is a normal good?
A good for which demand rises as income rise
