1.3 Price determination in a competitive market

Question 1

market

Answer 1

buyers and sellers engage in trade

Question 2

competitive market

Answer 2

large no. of buyers and sellers with abundant information

Question 3

competitive market

Answer 3

demand=supply

Question 4

effective demand

Answer 4

the desire for good with the ability to pay

Question 5

substitute

Answer 5

the alternative to another good

Question 6

complement

Answer 6

consumed together with another good

Question 7

price elasticity of demand

Answer 7

the response of %change in demand to a %change in price

Question 8

income elasticity of demand

Answer 8

the response of %change in demand to a %change in income

Question 9

cross elasticity of demand

Answer 9

response of %change in demand A to a %change in price B

Question 10

supply

Answer 10

quantity of goods and services firms are willing and able to sell at a given price

Question 11

price elasticity of supply

Answer 11

response of %change in supply to a %change in price

Question 12

market disequilibrium

Answer 12

quantity demanded does not equal supply

Question 13

excess supply

Answer 13

supply exceeds demand, price higher than equilibrium

Question 14

excess demand

Answer 14

demand exceeds supply, price than an equilibrium

Question 15

market forces

Answer 15

interaction of forces of demand and supply

Question 16

joint demand

Answer 16

demanded together e.g. complements

Question 17

joint supply

Answer 17

production of one good leads to the production of another good

Question 18

composite demand

Answer 18

good is demanded for more than one use

Question 19

derived demand

Answer 19

when a good is necessary for the provision of another good