1.3 price determination in a competitive market Flashcards
competing supply
when resources can be used to produce one good or another good, not both
competitive markets
a market with large numbers of buyers and sellers, low barriers to entry and exit
complementary goods
goods in join demand; these goods are often bought together
e.g. printers and ink cartridges
composite demand
demand for a multi-purpose good
condition of demand
determinant of demand other than the good’s price, that sets the position of the good’s demand curve
condition of supply
a determinant of supply other than the good’s price, that sets the position of the good’s supply curve
customer sovereignty
consumers can collectively govern production in a market via excercising spending power
strongest in perfectly competitive markets
cross elasticity of demand (XED)
measures the responsiveness of a good’s demand to a change in the price of a different good
demand
the quantity of a good or service that a consumer is willing and able to buy at a given price at a given time
derived demand
demand for a good that is the input of another good
disequilibrium
excess supply or demand in a market
effective demand
desire for a good or service that is backed by the ability to pay for said good or service
elasticity
the proportionate responsiveness of a second variable to a change in a first variable
equilibrium
no excess supply or demand in a market
a state of balance between opposing forces
equilibrium price
the price where planned demand matched planned supply
excess demand
when consumers want to buy more than producers are willing to sell; occurs below equilibrium price