Basics Flashcards
Monopoly
One firm dominates market
Duopoly
2 firms dominate market
Oligopoly
Few markets dominant
Market
Exists when buyers and sellers exchange goods, services and resources
Characteristics of market
Buyers, sellers, something to exchange (voluntarily)
Demand
The consumers’ buying intentions for a product
Law of demand
A negative relationship between price and quantity, as price rises people buy less
Ceteris paribus
Holding other factors constant; the hypothesis is valid as long as other factors remain the same
Income effect
When a price of a good rises, consumers are less willing to buy due to decreased real income/purchasing power
Substitution effect
When price of a good increases, other goods look more attractive due to being comparatively cheaper
Non price factors affecting demand
Levels of disposable income, price of related goods, tastes/preferences, expectations of consumers, demographic factors
Supply
The amount of a good or service that producers are willing and able to sell at a particular price at a particular time
Non price factors affecting supply
Costs of production, prices of other goods, technology, expectations of producers
Price in relation to supply/demand curve
A movement along curve
Non price factor in relation to supply/demand curve
Shift of curve
Which direction would the curve shift?
right for increase, left for decrease
Surplus
Caused when there is too much of a product
Positive statement
Tested objectively, quantified and analysed, not based on value judgement
Normative statements
Untestable, no hard facts or figures, based on value judgements or assumptions
Microeconomics
Economic problem on an individual level
Macroeconomics
The economic performance as a whole on a societal level
Which economic question is the distributive function?
For whom
