4.1.3 Price determination in a competitive market Flashcards
A market is…
a situation in which buyers and sellers come together to engage in trade
A competitive market is…
a situation where there is a large number of potential buyers and sellers with abundant information about the market
Equilibrium price…
the price at which the planned demand of consumers equals the planned supply of firms
Demand is…
the quantity of a good or service that consumers are willing and able to buy at given price in a particular time period
Effective demand is…
Consumers’ desire to buy a good backed up by the ability to pay
What does ‘ceteris paribus mean’
All other possible factors of demand are held constant
Conditions of demand are…
Factors other than price of the good that lead to a change in position of the demand curve
Example of conditions of demand are…
1) Real disposable incomes
2) Tastes and preferences
3) Population
4) Price of substitute products
5) Price of complementary goods
Taxation is…
A charged placed by the government on various forms of economic activity
Substitutes goods are…
A good that can be consumed as an alternative to another good
Complementary goods are..
A good that tend to be consumed together with another good
Rightward shift on demand curve means…
Increase in demand
Means greater quantity of good or service is demanded at any given price
Leftward shift on demand curve means…
Decrease in demand
lower price of a good or service is demanded at any given price
Law of demand states…
As price of a good or service falls, the quality demand increases
Supply is…
The quantity of a good or service that firms plan to sell at given prices in a particular period
