3.1 / 3.3 The Determinants Of The Demand And Supply For Goods And Services Flashcards
Definition of demand
The quantity of a product that consumers are willing and able to purchase at a given price
Definition of normal good
Demand rises as income rises and demand decreases as income decreases
Definition of Inferior good
Demand falls as income rises and demand increases as income falls
What does a demand curve show?
The relationship between price and quantity demanded
What does contraction in a demand curve show?
When price rises, quantity falls
What does expansion show on a demand curve?
When price falls, quantity increases
Definition of supply
Supply is the quantity of a product that a producer is willing and able to supply onto the market at a given price in a given time period
What does equilibrium mean?
State of balance between market demand and supply
What does an increase in supply mean?
As quantity increases, price falls
What does a decrease in supply mean?
As price increase, quantity decreases
Effective demand definition
Consumers desire to buy a good, backed up by the ability to pay
Market definition
A situation where buyers and sellers come together to engage in trade
Competitive market definition
A situation where there is a large number of potential buyers and sellers with abundant information about the market
Equilibrium price definition
The price at which the planned demand of consumers equals the planned supply of firm
What is the only thing that leads to a contraction or extension along the demand curve?
A change in price
Conditions of demand definition
Factors other than the price of the good that lead to a change in position of the curve
What are the conditions of demand?
- population
- income
- related goods
- advertising
- tastes and fashions
- expectations
- seasons
Anagram to remember conditions of supply
PIRATES
Substitute definition
A good that may be consumed as an alternative to another good
Complement definition
A good that tends to be consumed together with another good
What is law of supply?
That as price increases for a good the quantity supplied will increase
Conditions of supply definition
Factors other than the price of the good that lead to a change in position of the supply curve
What are the conditions of supply?
- productivity
- indirect taxes
- number of firms
- technology
- subsidies
- weather
- cost of production
What is the anagram to remember the conditions of supply?
PINTS CW
