1.2.6 Price determination

Question 1

Effective Demand:

Answer 1

How much of a good that consumer are able and willing to buy at a given price

Question 2

Effective supply:

Answer 2

How much of a good that producer are able and willing to sell at a given price

Question 3

Complementary goods (e.g.):

Answer 3

Goods that are used together with other goods
E.g - Video games and consoles
- Tea and milk

Question 4

Substitute goods (E.g.):

Answer 4

Goods that can be replaced by the use of another good
E.g. - Coke and Pepsi
- Xbox and PlayStation

Question 5

Disposable vs Discretionary income:

Answer 5

Disposable income: The extra income that is left after you take away taxes
Discretionary income: The income left after taxes and rent, bills etc.

Question 6

Revenue formula

Answer 6

Revenue = market price x quantity sold

Question 7

Producer Surplus:

Answer 7

Producer surplus: the difference between the price that producers are willing and able to supply a good or service for and the price they actually receive.

Question 8

Consumer surplus:

Answer 8

Consumer surplus: the difference between the total amount that consumer are willing and able to pay for a good or service and the total amount they actually pay. The consumer surplus will decrease with a decrease in demand.