1. Demand and Supply Flashcards
theory, market, competitive market, monopoly
1
Q
Supply and Demand Theory
A
- Considers how buyers and sellers behave and interact with one another in competitive markets
- Shows how the interaction between buyers and sellers determines the quality of a good/service and price sold in the competitive market
2
Q
Buyers determine…
Sellers determine…
A
- Buyers determine DEMAND
- Sellers determine SUPPLY
3
Q
What is a ‘market’?
A
A market refers to a group of buyers and sellers of a particular good or service.
- Can happen in a physical or virtual space
- Can be highly organised or less organised
4
Q
What is a ‘competitive market’?
A
A competitive market refers to a market with many buyers and sellers so that each has a negligible impact on market price.
5
Q
What are the two characteristics to reach a perfect competitive market?
Why?
A
- The goods offered for sale are all exactly the same
- The buyers and sellers are so numerous that no single buyer or seller has any influence over the market price
- Because buyers and sellers accept the market price (‘price takers’), therefore they can buy and sell all they want
- Easier to analyse because everyone participating in the market takes the price given by marketing conditions
6
Q
What is a monopoly?
A
Monopoly refers to only one seller and this seller sets the price - ‘owning the whole market’
