Supply and Demand Flashcards
(34 cards)
What is the definition of Demand?
The number of people willing and able to buy something at a given price and a given time
What is scarcity?
A lack of/low supply of something
What is the relationship between price and demand?
There is an inverse relationship between price and demand.
-as price goes up demand goes down
What does ceteris paribus mean?
Ceteris paribus means all factors are held constant but one
What is Derived demand?
A good that is demanded in order to produce another.
-E.g. An orange to make orange juice
What are substitutes?
Substitutes are goods in competitive demand and act as replacements for another product.
What are compliments?
Compliments are goods that are demanded alongside other goods.
What is composite demand?
A good that is demanded for 2 or more uses.
-E.g. Wood to make a table and chairs
What is an inferior good?
A good where when your income rises demand for the good falls.
-E.g. Supermarket branded beans
What is a normal good?
A good where when your income rises the demand for the good rises.
-E.g. Takeaway or leisure activities
What are the determinants of demand?
A-advertising
P-price of substitutes and compliments
I-Income(Normal/Inferior goods)
N-number of people
T-trends/taste
What is utility?
Utility means satisfaction/Well-being
What is the law of diminishing marginal Utility?
As more of a good is consumed the marginal utility falls.
- Marginal utility can go into negatives
What is marginal utility?
The addition to total utility gained from consuming one extra unit of a thing.
What is consumer surplus?
The maximum a consumer would have been willing to pay above what they spent.
-Consumer surplus can be reduced by increasing price
What is producer surplus?
The difference between the amount a supplier is willing to charge and what they actually charge.
How does shifts in the demand curve affect consumer and producer surplus?
Demand curve shift right-consumer surplus increases
Demand curve shifts left- Consumer surplus decreases
- As price increases consumer surplus decreases.
What is the definition of economics?
How infinite wants best meet finite resources
What is a positive statement?
A statement that can be tested
-dosent have to be true just has to be able to be verified.
-E.g.it is 25 degrees outside
What is a normative statement?
A statement that is subjective/an opinion.
-E.g. orange is a better colour then red
What is opportunity cost?
The decision to sacrifice one thing for another.
-The next best thing
-Opportunity cost is the value of the opportunity that has been lost and sacrifice d when making a decision
What is a free good?
Something that has no opportunity cost
What are the 4 factors of production?
Land-Space of work, natural resources
Labour-work force that keeps business running
Capital-Equipment/machinery
Enterprise-Idea/Innovation
What are externalities?
How the decision of one party affects another
