DEMAND AND SUPPLY Flashcards
what is allocative efficiency?
refers to making the best possible use of scarce resources to produce the combinations of goods and services that are optimum for society, thus minimising resource waste.
what are compliment goods/services?
goods/services consumed together
eg. car and petrol
what is a contraction in demand?
when the quantity demanded falls due to the price riseit is called contraction of demand.
what is a decrease in demand?
decrease in demand happenswhen less is purchased at the same price or the same quantity at a lower price.
what is demand?
indicates the various quantities of a good that consumers are willing and able to buy at different possible prices during a particular time period
what is diminishing marginal utility?
the phenomenon that each additional unit of gain leads to an ever-smaller increase in subjective value.
what is an expansion in demand?
when the quantity demanded rises due to a decrease in the price, keeping other factors constant
what is an expense?
outgoings or payment for resources by a business
eg. materials, rent, electricity
what is the income effect?
as price falls real income increases causing the consumer to buy more of a good.
what is an increase in demand?
a situation when the consumers buy a larger amount of a commodity at the same existing price
what is the law of demand?
a law stating that there is a negative relationship between the price of a good and the quantity of the good demanded, over a particular time period, ceteris paribus, as the price of the good increases, the quantity of the good demanded falls (and vice versa).
what is microeconomics?
the branch of economics that examines the behaviour of individual
what is the law of supply?
a law stating that there is a positive relationship between price and the quantity supplied of a good or service. that as the price of a good rises, the quantity supplied will rise over a certain period of time, ceteris paribus.
- firms are profit-maximising
what are non-price determinants of demand?
the variables (other than price) that can influence demand, and that determine the position of a demand curve. a change in any determinant of demand causes a shift of the demand curve.
what are non-price determinants of supply?
the variables (other that price) that can influence supply, and that determine the position of a supply curve. a change in any determinant of supply causes a shift of the supply curve.
