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Economics - Sept to Oct > 1) Demand - MMT > Flashcards

1) Demand - MMT Flashcards

1
Q

Demand:

what is a market?

A

a market exists whenever buyers and sellers arrange to exchange goods or services for money

Key words: buyers and sellers exchange

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2
Q

Demand:

what is a “global market”?

A
  • countries across the world
  • bring together sellers/growers of avocados
  • with buyers/consumers of the fruit
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3
Q

Demand:

what is demand?

A
  • The amount of a product that consumers are willing and able to buy at a particular price over a given period of time
  • Eg you might love to own a Ferrari but if you’re not able to afford one you’re not part of the demand for this product
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4
Q

Demand:

what is price?

A

-the amount of money a business receives for selling an individual good or service.

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5
Q

Demand:

what is cost?

A

what a business pays out for rescources or materials

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6
Q

Demand:

what is quantity demanded?

A
  • the total amount of a good of service that consumers demand over a given period of time
  • it’s specific eg £1.50 per pizza slice the canteen sell 100 per day
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7
Q

Demand:

what is individual demand?

A

the quantity of a good or service demanded by one individual at different prices, given income and other prices
- identifying individual preferences

eg at a price of £1.50 per pizza slice I will buy 2 a week but you might buy 5. However if the price was £1, I would buy 3 per week but you might buy 8

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8
Q

Demand:

what is market demand?

A
  • the market demand function represents the total quantity of a good demanded by all individuals at each price
  • it is the sun of individual demand curves for a particular good or service
  • (assuming the market is Hanley Castle students and staff) the market demand curve shows how many pizzas the canteen will sell at different prices
  • (normally bigger)
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9
Q

Demand:

what is price thought to be inversely linked to?

A

quantity demanded

  • If the price of a product increases then you would (normally) expect the quantity of the product demanded to fall
  • Similarly, a lower price would hopefully leas to an increase in quantity demanded
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10
Q

Demand:

what are the 2 reasons we buy more at lower prices?

A
  • the income effect

- the substitution effect

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11
Q

Demand:

what is the income effect?

A

lower prices increase our purchasing power

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12
Q

Demand:

what is the substitution effect?

A

consumers perceive lower priced goods to be better value relative to goods whose prices haven’t changed, therefore they “substitute” (replace) the expensive goods with the cheaper

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13
Q

Demand:

what is the law of demand?

A

The Law Of Demand, states that if all other factors remain equal, the higher the price of a good, the less people demand that good

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14
Q

Demand:

what does the demand curve for a product show?

A

the relationship between price and quantity demanded for that product over a range of different prices

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15
Q

Demand:

what is the shape of a demand curve?

A
  • demand curves nearly always slope downwards from left to right, indicating an inverse relationship between price and quantity demanded
  • price increases lead to lower quantity demanded and vice versa
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16
Q

Demand:

when the demand curve goes down, it “…”

A

extends

17
Q

Demand:

what’s contraction/ contracting?

A

eg if the price went above £2 ( the maximum) we would expect the demand curve to go further back towards the P axis

18
Q

Demand:

a change in price leads to…

A

a movement ALONG the demand curve

19
Q

Demand:

what is “cesteris paribus”

A

assuming that “everything else remains equal”

20
Q

Demand:

what is the relationship between price and quantity demanded?

A

inverse

21
Q

Demand:

what leads to an extension in the D curve?

A

the lower the price the more will be demanded, this leads to an extension in the D curve

22
Q

Demand:

what are the 3 determinants of demand?

A

1) a change in income
2) a change in the price of other goods
3) tastes and fashions may have changed

23
Q

Demand:

what is an example of a change in income?

A

(pizza slices example), parents may be struggling with the cost of living so insist children have packed lunches instead

24
Q

Demand:

what is an example of a change in the price of other goods?

A

1) either the price of substitute goods (eg chicken nuggets) has gone down
2) or the price of complementary goods (eg ketchup) has gone up

25
Q

Demand:

what is an example of tastes and fashions changing?

A

(pizza slices example), the government may have publicised a link between excessive pizza consumption and diabetes

26
Q

Demand:

a decrease in levels of demand will shift D to the…

A

left

27
Q

Demand:

an increased levels of demand shift D to the…

A

right

28
Q

Demand:

what is RDI?

A

Real Disposable Income, (Real takes into account inflation)

29
Q

Demand:

what is derived demand?

A

this occurs when a good or factor of production such as labour is demanded for another reason
-> (demand resulted from demand for an intermediate good or service

30
Q

Demand:

what is composite demand?

A

a good which is demanded for multiple different uses

31
Q

Demand:

what is joint demand?

A

goods bought together eg printer and ink

32
Q

Supply/Demand:

what is equilibrium price?

A

Defined as the price at which demand =supply and where the price will settle, until such time as there is a change in either the conditions of demand or of supply.

33
Q

Demand:

what do you do if you have excess demand?

A

there is a waste of potential profits, the price is too low so increase the price

34
Q

Supply/Demand:

how is price determined?

A

by the interaction of demand and supply

35
Q

Supply/Demand:

if the price is above equilibrium there is excess…; below equilibrium is excess…

A

supply…demand

36
Q

Supply/Demand:

excess supply brings the price…; excess demand brings the price…

A

down…up

37
Q

Supply/Demand:

in economics any given market is only… when supply equals demand, which is where the two curves cross

A

‘at rest’ (in equilibrium)

Economics - Sept to Oct (12 decks)

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