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
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2
Q

Market disequilibrium

A

Any situation where supply does not equal demand causing excess supply or excess demand

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3
Q

Excess supply

A

Scenario where market price is too high so there is unsold products

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4
Q

Excess demand

A

Scenario where market price is too low so there is unsatisfied consumers in the market

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5
Q

ceteris paribus

A
  • all other things being equal
  • an assumption that market operates with total efficiency
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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
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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
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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
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