Booklet 2 Micro Y12 Flashcards
What is effective demand?
Effective demand is the willingness and ability to buy a good or service.
What does the Law of Demand state?
As price rises, fewer people are willing and able to buy a good.
What is diminishing marginal utility?
The decrease in satisfaction from consuming additional units of a good
What happens to demand when there is an increase in price?
An increase in price leads to a decrease in demand.
What is the relationship between quantity demanded and price in the context of demand contraction?
In demand contraction, quantity demanded decreases from Q1 to Q2 as price increases.
What is an extension of demand?
An extension of demand occurs when there is a decrease in price, leading to an increase in demand.
What is the Law of Supply?
As price rises, sellers have a greater incentive to sell.
What happens during a contraction of supply?
Decrease in price leads to a decrease in supply.
What is the relationship between price and supply in an extension of supply?
Increase in price leads to an increase in supply.
What is the result of sellers having a greater incentive to sell?
They will make a higher return (profit), therefore a greater incentive to sell.
What is excess supply?
Excess supply refers to a surplus in the market.
What is market equilibrium?
Market equilibrium is where supply and demand intersect.
What happens in case of excess demand?
Excess demand leads to a shortage in the market.
When does the market move from equilibrium?
The market only moves from equilibrium if there is a shift in one of the curves or due to government intervention.
What are market forces?
Market forces are factors that influence the price and quantity of goods, such as supply and demand.
