Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Economics > Competitive Markets > Flashcards

Competitive Markets Flashcards

1
Q

What are markets

A

Where goods and services are bought and sold

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What are sub markets

A

Smaller markets that make up a market

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What determine the levels of demand and supply in a market

A

Price charged and quantity sold

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What is demand

A

The quantity of a good or service a consumer is willing and able to buy at a given price, at a particular time

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What causes an contraction in demand

A

An increase in price

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What causes an extension in demand

A

A decrease in price

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What does it mean when a demand curve shifts left

A

Decrease in amount demanded at every price

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What does it mean when a demand curve shifts right

A

An increase in amount demanded at every price

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What causes shifts in demand curve

A

Changes in taste of people

Changes in real income

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What are inferior goods

A

Goods that people demand less when real income increases

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What are normal goods

A

Goods that people demand more when real income increases

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What are substitute goods

A

Goods that are alternatives to eachother

E.g. increase in price in one will increase demand in the other and vice versa

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What are complementary goods

A

Goods that are often used together

Joint demand

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What is derived demand

A

Demand for a good or factor of production used in making another good or service

(E.g increase in demand for fencing -> increased derived demand for wood)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What is elasticity of demand

A

Measure of how much the demand for a good changes with a change in one of the key influences

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What does PED (price elasticity of demand) measure

A

Measure of how the quantity demanded of a good responds to a change in its price

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

What is the PED equation

A

PED = percentage change in qty demanded / percentage change in price

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

What does it mean if PED > 1

A

It is elastic

A percentage change in price will cause a small percentage change in qty demanded

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

What does it mean when PED is between 0 and 1

A

It means it is inelastic

A percentage change in price will cause a larger percentage change in qty demanded

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

What does it mean when PED = 0

A

It is perfectly inelastic

Any increase in price has no effect on demand

21
Q

What does it mean if PED = ± infinity

A

Perfectly elastic demand

Any increase in price will cause

22
Q

What does it mean If PED = ± 1

A

Unit elasticity

The percentage changes are equal

23
Q

What is income elasticity of demand

A

How much demand changes for a good with a change in real income

24
Q

What is the formula for YED

A

YED = percentage change in quantity demanded for a good / percentage change in real income

25
Q

What is cross elasticity of demand (XED)

A

Measure of how quantity demanded of one good responds to a change in price of the other

26
Q

What is the formula for XED

A

XED = percentage change in quantity demanded of good A / percentage change in price of good B

27
Q

What are the factors that influence elasticity of demand

A
  • substitutes (the more substitutes, the more price elastic)
  • type of good (e.g. essentials, cannot be postponed)
  • percentage of income spent on good
28
Q

What type of good has a positive YED

A

Normal goods

Incomes rise, demand increases

29
Q

What type of good has a negative YED

A

Inferior goods

Incomes rise, demand falls

30
Q

What type of good has a positive XED

A

Substitute goods

31
Q

What type of goods have a negative XED

A

Complement goods

32
Q

What are elasticities of demand useful for

A

Sales forecasting

Telling firms what to do in certain situations

33
Q

What is supply

A

The quantity of a good or service thst producers supply to the market at a given price, at a particular time

34
Q

What are marginal firms

A

Firms that are just breaking even

35
Q

What causes shifts in supply

A

Changes in cost of production

Improvements in technology

Changes in the productivity of the factors of production

36
Q

What is joint supply

A

When the production of one good or service involves the production of another

E.g. if the price of the product increases, then supply of it and any other join products increased

37
Q

What does price elasticity of supply (PES) measure

A

Measure of how the quantity supplied of a good responds to a change in price

38
Q

What is the formula for PES

A

PES = percentage change in quantity supplied / percentage change in price

39
Q

Why is a high PES important to firms

A

Important as firms aim to respond quickly to changes in price and demand

So they must keep their supply elastic (PES >1)

40
Q

What are perishable goods

A

E.g. fresh fruit

Inelastic supply as cannot be stored long

41
Q

What is market equilibrium

A

When demand = supply

42
Q

What do supply and demand determine in a free market

A

They determine the equilibrium

43
Q

What is excess supply

A

When the quantity supplied to a market is greater than the quantity demanded

44
Q

What is excess demand

A

When the demand for a good or service is greater than its supply

45
Q

What is a competitive market

A

When there is a large number of buyers and sellers

No single consumer or producer can influence the allocation of resources by the market

46
Q

What is a price mechanism

A

The means by which decisions of consumers and businesses interact to determine the allocation of resources

47
Q

What is consumer surplus

A

The difference between the price that a consumer is willing to pay for a good and the price that they actually pay

E.g. someone is prepared to pay £10 for a good and bought it for £8 then that is a consumer surplus of £2.

48
Q

What is producer surplus

A

The difference between the price a producer is willing to supply a good or service at and the price they actually receive for it

E.g. equilibrium price of a good is £15, but a supplier is able to sell it for £10. The producer surplus is £5

49
Q

Is price elastic or inelastic in the short run

A

Price inelastic

Difficult to increase production in short run as capital is fixed

Economics (38 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions