Price determination of a competitive market

Question 1

competing supply

Answer 1

when resources can be used to produce one good or another good- not both

Question 2

competitive markets

Answer 2

a market with large numbers of buyers and sellers, with low barriers to entry and exit

Question 3

complementary goods

Answer 3

Goods in joint demand- these goods are often bought together e.g. printers and ink

Question 4

composite demand

Answer 4

demand for a multipurpose good

Question 5

condition of demand

Answer 5

determinant of demand other that the good’s price, that sets the position of the good’s demand curve

Question 6

condition of supply

Answer 6

Factors affecting product quantity producers offer.

Question 7

customer sovereignty

Answer 7

Consumers can collectively govern production in a market by exercising spending power. Strongest in a perfectly competitive market

Question 8

cross elasticity of demand (XED)

Answer 8

measures the responsiveness of a good’s demand to a change in the price of a different good

Question 9

Demand

Answer 9

the quantity of a good or service that a consumer is willing and able to buy at a given price, at a given time

Question 10

derived demand

Answer 10

demand for a good that is the input of another good

Question 11

disequilibrium

Answer 11

excess supply or demand in a market

Question 12

effective demand

Answer 12

Actual sustainable consumer demand.

Question 13

elasticity

Answer 13

the proportionate responsiveness of a second variable to a change in a first variable

Question 14

equilibrium

Answer 14

No excess supply or demand in a market; a state of balance between opposing forces

Question 15

equilibrium price

Answer 15

the price where planned demand matches planned supply

Question 16

excess demand

Answer 16

when consumers want to buy more than producers are willing to sell; occurs below equilibrium price

Question 17

excess supply

Answer 17

when producers want to sell more than consumers are willing to buy; occurs above equilibrium price

Question 18

exchange

Answer 18

trading objects value, utilising media of exchange e.g. money

Question 19

income elasticity of demand (YED)

Answer 19

measures the responsiveness of a good’s demand to a change in the incomes of consumers

Question 20

inferior good

Answer 20

a good for which demand rises as incomes fall

Question 21

joint supply

Answer 21

when one good is produced, another good is also produced from the same raw materials

Question 22

normal good

Answer 22

a good for which demand rises as income rises

Question 23

price elasticity of supply

Answer 23

measures the responsiveness of a good’s supply to a change in price

Question 24

producer sovereignty

Answer 24

producers determine what is produced and the prices change

Question 25

substitute good

Answer 25

a good in a competing demand; a good that can be used in place of another similar good

Question 26

supply

Answer 26

the quantity of a good or service that a producer is willing and able to sell at a given price, at a given time