1.2.3 markets Flashcards
market equilibrium
state of equality or balance between market demand and market supply
supply
the amount of product or service that a business is willing and able to provide at a given price
demand
the amount of product or service that customers are willing and able to buy at a given price
market clearing price
- the interaction of buyers and sellers will provide an equilibrium price in a market where demand and supply is equal.
- the point where the supply curve meets the demand curve is the equilibrium point.
surplus
where supply exceeds demand then there is a surplus.
may be due to the price being too high.
shortage
where demand exceeds supply there will be a shortage.
this may be because the price being charged is too low.
how a price increase affects the supply curve
- as prices increase this causes movement along the supply curve.
- as prices increase- suppliers want to supply more of a product or service
how a price decrease affects the supply curve
- as prices decrease then this causes movement down the supply curve.
- as prices decrease- suppliers want to supply less of a product or service.
how non-price factors can affect the supply curve: increase in supply (surplus)
an increase in the level of supply (due to non-price factors) means that the whole supply curve shifts to the right
how non-price factors can affect the supply curve: decrease in supply (shortage)
a decrease in the level of supply (due to non-price factors) means that the whole supply curve shifts to the left
how a price increase affects the demand curve
an increase in demand from customers will cause movement to the left along the demand curve
how a price decrease affects the demand curve
a decrease in demand from customers will cause movement to the right along the demand curve
how non-price factors can affect the demand curve: increase in demand
an increase in demand (due to non-price factors) means that the whole demand curve shifts to the right
how non-price factors can affect the demand curve: decrease in demand
a decrease in demand (due to non-price factors) means that the whole demand curve shifts to the left
supply curve
a line to plot the relationship between price and quantity supplied
demand curve
a line to plot the relationship between price and quantity demanded
normal good
products where an increase in consumers income means and increase in demand
inferior good
products where an increase in consumers income means a decrease in demand
subsitute good
an alternative product used to satisfy a want
complementary good
products that may be used together
