The market Flashcards
demand, supply, markets, PED, YED (30 cards)
What is demand?
Demand is the quantity of a good or service that consumers are willing and able to purchase at various prices.
What factors can shift the demand curve?
Factors include consumer income, preferences, prices of related goods, expectations, and the number of buyers.
Define supply.
Supply is the quantity of a good or service that producers are willing and able to sell at various prices.
What is the law of demand?
The law of demand states that, all else being equal, as the price of a good decreases, the quantity demanded increases, and vice versa.
True or False: An increase in consumer income will always increase demand for normal goods.
True
What does PED stand for?
PED stands for Price Elasticity of Demand.
What does a PED value greater than 1 indicate?
It indicates that demand is elastic, meaning consumers are highly responsive to price changes.
Fill in the blank: If the price of a substitute good increases, the demand for the original good will ______.
increase
What is YED?
YED stands for Income Elasticity of Demand.
What does a YED value less than 0 indicate?
It indicates that the good is an inferior good, meaning demand decreases as income increases.
What is a market?
A market is a place or system where buyers and sellers interact to exchange goods and services.
True or False: A shift to the right in the supply curve indicates an increase in supply.
True
What is the equilibrium price?
The equilibrium price is the price at which the quantity of a good demanded equals the quantity supplied.
Define consumer surplus.
Consumer surplus is the difference between what consumers are willing to pay for a good and what they actually pay.
What is the law of supply?
The law of supply states that, all else being equal, as the price of a good increases, the quantity supplied increases, and vice versa.
Fill in the blank: Goods that have a PED of 0 are considered ______.
perfectly inelastic
What is a shift in demand?
A shift in demand refers to a change in the quantity demanded at every price, caused by factors other than the price of the good.
What does a perfectly elastic demand curve look like?
A perfectly elastic demand curve is horizontal, indicating that consumers will only buy at one price.
True or False: If demand is inelastic, a price increase will lead to a decrease in total revenue.
False
What is an example of a complementary good?
An example of a complementary good is coffee and sugar.
What happens to the demand curve when consumer preferences shift towards a good?
The demand curve shifts to the right.
Define producer surplus.
Producer surplus is the difference between what producers are willing to accept for a good and what they actually receive.
What is a market equilibrium?
Market equilibrium is the state where supply equals demand, resulting in no surplus or shortage.
True or False: A decrease in the number of suppliers will shift the supply curve to the left.
True
