Demand and Supply Flashcards
What are the factors that affect demand?/causing a shift
Price of the good , perceived quality , fashion, income levels, advertising, price of other goods
What are the factors that affect supply?/causing a shift
Production costs, technology, competition , weather, productivity of labour , subsidies ,
What causes movement along the demand curve and the supply curve?
Caused by changes in price
What is consumer surplus?
Difference between what a consumer is prepared to pay for a good versus what they actually pay
What is producer surplus?
The difference between what the producer is willing to supply for versus what they actually get.
What is price mechanism?
Decisions of consumers and businesses interact to determine the allocation of resources
What are the 3 functions of price mechanisms?
Signalling , rationing incentive
What is price rationing?
supply of a good is limited, price increases, reduces demand, allocates the available quantity to those who are willing and able to pay the higher price.
What is price signalling?
changes in the price of a good or service that are intended to communicate information to consumers and producers and to influence their behaviour.
What is price incentive?
price reductions are offered to consumers to encourage them to buy a particular product earlier or in larger quantity
What is opportunity cost?
The value of the best alternative forgone in making any choice
What is a trade off?
one must choose between two alternatives
