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A Level Economics Yr12 Microeconomics > Section 2: Competitive Markets > Flashcards

Section 2: Competitive Markets Flashcards

1
Q

What are markets?

A

Where goods and services and brought and sold

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2
Q

What are sub-markets?

A

They are smaller markets that make up a market

E.g labour market made out of smaller markets for teachers, engineers and doctors

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3
Q

The price charged for and quantity sold for each good or service is determined by…

A

Supply and demand

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4
Q

What are the levels of supply and demand determined by?

A

Diagrams which demonstrate the price level and quantity demanded/supplied of goods and services

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5
Q

What is demand?

A

The quantity of a good/service that consumers are willing and able to buy at a given price at a particular

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6
Q

What a demand curve?

A

Shows the relationship between price and quantity demanded

-at any given point along the curve it shows the quantity of the good or service that would be brought at a particular price

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7
Q

What does it mean when the demand curve slopes downwards?

A

-it means that the higher the price charged for a good, the lower the quantity demanded

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8
Q

In general what do customers aim for?

A

To pay the lowest price possible for goods and services

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9
Q

As prices decrease….

A

More consumers a willing and able to purchase a good or service

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10
Q

Lower prices means ….

A

Higher demand

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11
Q

How can you describe the relationship between price and quantity demand?

A

The law or diminishing marginal utility
Income effect
Substitution effect

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12
Q

Describe the income effect?

A

(Assuming a fixed level of income)
the income effect means that as a price falls the amount that consumers can buy with their income increases and so the demand increases

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13
Q

What is the substitution effect?

A

-a fall in the price of a good makes it relatively cheaper than other goods, so consumers will increase demand for a cheaper good and reduce demand for expensive good

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14
Q

Changes in demand cause?

A

A shift in the demand curve

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15
Q

What does it mean when the demand curve moves left?

A

There is a decrease in the amount demanded at every price

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16
Q

When does it mean when the demand curves moves right?

A

Increase in the amount demanded at every price

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17
Q

Changes in taste and fashion can cause demand curves?

A

-shifts to the right if something is popular

-shifts to the left if something is out of fashion

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18
Q

What are the two factors that can cause a shift in the demand curve?

A

-fashion
-changes to people’s real income

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19
Q

Changes in one market….

A

Can affect demand in other markets

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20
Q

What are interrelated markets?

A

-one market affect a related market

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21
Q

What are substitute goods?

A

Goods which are alternate to each other (beef and lamb)

-an increase price for one will decrease the demand for it and increase the demand for its substitutes(competitive demand)

22
Q

What are complementary goods?

A

Goods that are often used together, so they’re in joint demand

E.g strawberries with cream

23
Q

What is derived demand?

A

Is the demand for a good or a factor of production used in making another good or service

-increase in the demand of fencing-increase derived demand for wood

24
Q

What is composite demand?

A

Some goods having more than one used

25
Q

What is elasticity of demand?

A

A measure of how much the demand for a good changes with a change of one of the key influences on demand

26
Q

What is the price elasticity of demand?(PED)

A

A measure of how the quantity demanded of a good responds to a change in its price

27
Q

How can the price elasticity of demand(PED) be calculated?

A

Percentage change in quantity demanded/percentage change in price

28
Q

PED can be ….

A

-elastic
-inelastic
-unit elastic

29
Q

How do you know if the good is elastic?

A

If the value of PED is greater than 1, the demand for the good is elastic

30
Q

The higher the value of the PED…

A

The more elastic the demand is for the good

31
Q

What factors influence the price elasticity of demand?

A

-substitutes

-type of good

-percentage of income spend on good

-time

32
Q

How does the type of good influence the price elasticity of demand?

A

-demand for essential items is price inelastic but demand for non-essential items is elastic

-demand for goods that are habit forming tend to be price inelastic

-demand for purchases than cannot be postponed tends to be price inelastic

-demand for products with several uses tend to be price inelastic

33
Q

How does time influence the price elasticity of demand?

A

-in the long run demand becomes price elastic as it becomes easier to change to alternatives because consumers have had time to shop around

34
Q

How does percentage of income spend on goods influence the price elasticity of demand?

A

-demand for products that need a large proportion of the consumers income is more price elastic then demand for products that only need a small proportion of income

35
Q

How does substitutes influence the price elasticity of demand?

A

-the more substitutes a good has, the more price elastic the demand is (if there are many substitutes available than consumers can easily switch to so,etching els if the price rises

-the number of substitutes of a good depends on how closely it is defined

36
Q

What is effective demand?

A

Desire to buy a good or a service and willingness to pay for it

37
Q

What can cause changes in the demand curve?
Left or right

A

-real income

-fashion(seasonality eg tastes)

-price of complementary goods
-external shocks

-substitute goods (competition)

-derived demand(wood is used for fencing)

-composite demand(goods have more than one use-demand curve for fuel leads to changes in demand curve for plastics)

38
Q

What is composite demand?

A

-composite demand(goods have more than one use-demand curve for fuel leads to changes in demand curve for plastics)

39
Q

What is the most important factor in moving along the demand curve

A

Prices(everything comes under prices)

-everything els is shifting it left or right

40
Q

What is the law of diminishing marginal utility?

A

The decrease of satisfaction due to overconsumption (added consumption of each item)

41
Q

Describe normal goods supply and demand?

A

Prices increase, demand decreases

Prices decreases, demand increases

42
Q

What are inferior goods?

A

Goods which people demand less of when their real income increases. Rise in real income causes demand curve to shift to the left

43
Q

What are giffen goods (Collectors items)

A

They defy the laws of demand e.g paintings

-buy expensive products, sell them for more

44
Q

Derived demand?

A

Demanding something(wood) for what it can do for you fences

45
Q

What does a movement along the demand curve show?

A

A movement a,on the demand curve shows how quantity demanded responds to a change in price

46
Q

What is meant by a shift in the demand curve?

A

Shows how demand responds to a change in a non-price factor at any given price

47
Q

What is the proportional rise in demand to proportional rise in price known as

A

Unity

48
Q

A

A
49
Q

What is elasticity of demand in simplistic terms?

A

Consumers responsiveness not a change in the goods price

50
Q

Where there are substitutes the demand curve is very …

A

Elastic

A Level Economics Yr12 Microeconomics (2 decks)

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