8 The interaction of markets Flashcards
1
Q
Market equilibrium
A
- point at which the quantity supplied is equal to quantity demanded of a particular product
- supply curve = demand curve
- shows the market price and quantity sold in the market
2
Q
Market disequilibrium
A
Any situation where supply does not equal demand causing excess supply or excess demand
3
Q
Excess supply
A
Scenario where market price is too high so there is unsold products
4
Q
Excess demand
A
Scenario where market price is too low so there is unsatisfied consumers in the market
5
Q
ceteris paribus
A
- all other things being equal
- an assumption that market operates with total efficiency
6
Q
related markets - substitutes
A
- bad harvest of bananas = decrease in supply and market price increases
- increase demand for apples as a substitute of bananas = increase in market price of apples and increased quantity supplied and demanded
7
Q
related markets - complements
A
- recession in economy = increase in demand for bread
- demand shifts to the right and an increase in market price
- increase demand for butter as it is a complement of bread
- increase market price of butter and increase quantity supplied and demanded
8
Q
Evaluation of impact on related markets
A
- extent of substitutes - weak substitutes still choose expensive brand as they prefer it
- extent of complement - butter has many other uses not just for bread and therefore increased price of bread may not affect butter price
- time frame - short term decrease in price o petrol is unlikely to cause people to buy cars
- size of price change - small change in price for a good that i snot expensive is unlikely to have major impact