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Flashcards in Supply And Demand Deck (33):
1

Define demand

The quantity of a product that consumers are willing and able to purchase at various prices over a period of time

2

Effective demand

Quantity of a good or service that consumers are actually buying at the current market price

3

What relationship is there between price of a product and the quantity demanded

An inverse relationship

4

What do rational customers look to do

Wish to maximise satisfaction or utility from consumption by correctly choosing how to spend their limited income

5

Two types of goods

Inferior
Exceptional

6

Substitution effect

Describes the change in demand for a product when it’s relative price changes

7

Income effect

A fall in price increases the real purchasing power of consumers- allows people to buy more with a given budget

8

Demand curve

Relationship between the quantity demanded and the price of the product

9

Demand schedule

Data used to draw the demand curve for the product

10

What way does the demand curve slope and why

Downwards from left to right due to the law of demand

11

What is the law of demand

At higher prices less will normally be demanded than at lower prices

12

Determinants of demand

Consumers RDI
Substitutes
Complements
Change in tastes and fashions

13

Disposable income

Income after taxes

14

Real disposable income

Income after tax and distorting effects of inflation

15

Consumer surplus

The extra amount a consumer is willing to pay for a product above the price they actually do pay

16

Price discrimination

The action of selling the same product at different prices to different buyers- to maximise sales and profits

17

Diminishing marginal utility

The more of something we consume the less likely we are to want more of it

18

Law of supply

At higher prices we would expect more to be supplied

19

Production

The process of turning inputs of scarce resources into an output of goods or services

20

Define supply

The willingness and ability of firms to produce a given quantity of output in a given period of time, or at a given point in time, and take it to market

21

Why do supply curves slope upwards

Supply comes from businesses
Businesses are driven by profit
At higher prices, higher profit margins
Supply is higher at higher prices

22

Factors affecting supply

Availability of factors
Cost of factors
Technology
Taxes
Subsidies
Weather and natural factors

23

What is the golden rule?

Business Taxes affect supply not demand

24

Producer surplus

The difference between what producers are willing and able to supply a good for and the price they actually receive

25

Total surplus

Total gain to society from the production and consumption of a good

26

Equilibrium

State of physical balance

27

What are the 3 main resources

Land
Labour
Capital

28

How does the free market allocate resources

Through supply and demand

29

What is supply and demand like in a planned economy

No supply or demand
Gov decides how to divide up resources

30

Advantages of planned economies in relation to supply and demand

Can control where to put resources

31

Disadvantages of planned economies in relation to supply and demand

No competition to drive up quality or to keep costs down

32

What is supply and demand like in a mixed economy

Individuals decide how much they want to make, offer
Market forces will dictate the right number
Gov intervenes to provide key services

33

What are economic resources

Goods or services available to individuals and businesses used to produce consumer products