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Microeconomics > Demand And Supply > Flashcards

Demand And Supply Flashcards

1
Q

Define demand

A

The amount that consumers are willing and able to buy at each given price level

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2
Q

Define effective demand

A

Demand backed by the ability to pay

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3
Q

Define latent demand

A

Demand where you’re unable to pay for it meaning you can’t afford it

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4
Q

Define contraction in demand

A

When quantity demanded decreases due to a rise in price

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5
Q

Define extension in demand

A

When quantity demanded increases because of a fall in price

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6
Q

List things which are determinants in demand

A 
Changes in income
Prices of substitutes
Prices of complementary goods
Consumer confidence
Interest rates
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7
Q

Define substitute

A

Replacement for another product

There are close and weak substitutes

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8
Q

Define complementary good

A

Goods that are consumed together

E.G. PS4 and PS4 controller

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9
Q

Define normal good

A

Goods or services that will see an increase in demand when income rises

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10
Q

Define inferior good

A

Goods or services that will see demand fall when income rises

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11
Q

Define composite demand

A

A good that is demanded for more than one purpose so that an increase in demand for one purpose reduces the supply for an other
E.G. increase in demand for steel in houses reduces supply for cars

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12
Q

Define derieved demand

A

When the demand for one good or service comes from the demand for another good or service.

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13
Q

What are the factors of production

A

Land
Labour
Capital
Enterprise

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14
Q

Define opportunity cost

A

The next best alternative forogne when an economic decision is made.
It’s the next best alternative, not a best range of alternatives

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15
Q

Define price elasticity of demand

A

Measures of the responsiveness of quantity demanded to a change in the price of a good

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16
Q

What is the formula for price elasticity of demand

A

%change in QD

—

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17
Q

What happens when the PeD is below -1

A

The good is price elastic
A fall in price means QD rises by proportionately more then the price cut
A fall in price increases revenue

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18
Q

What happens and the PeD is between 0 and -1

A

The good is price inelastic

When prices fall QD increases but by a smaller proportion than the fall in price

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19
Q

Factors that determine PeD

A

Availability of substitues
Time
Luxury or necesitty
Proportion of income spent on a good

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20
Q

Define income elasticity of demand

A

Measure of the responsiveness of quantity demanded to a change in income

21
Q

What is the formula for IeD

A

%change QD

—

22
Q

How do you know if the good is a normal good via there IeD

A

If the number is positive

23
Q

If the number is greater the good is

A

More luxurious

24
Q

When is the IeD elastic

A

When the IeD is between -1 and 1

25
Q

Define cross price elasticity

A

A measure in responsiveness of quantity demanded of one good to a change in the price of another good

26
Q

What is the formula for CPeD

A

%change QD of good A

—

27
Q

What does it mean when XPeD is negative?

A

The goods are complementary

28
Q

What does it mean when the XPeD is positive

A

The goods are substitutes

29
Q

If the XPeD number is small what does that mean

A

The substitutes arent very close

30
Q

Define rationing function

A

When consumers don’t buy as much

31
Q

Define incentive function

A

When producers produce more as they’ll make more

32
Q

Define signalling function

A

Other industries realising profits are being made elsewhere

33
Q

Define supply

A

The amount offered for sale by producers at each given price level

34
Q

List some determinants in supply

A 
Technological improvements
Changes in lahbour productivity
Laws 
Expectations about future prices
Number of sellers in the market
35
Q

Define price elasticity of supply

A

Measures of the responsiveness of quantity supplied to changes in the price

36
Q

What is the formula for PeS

A

%change QS

—

37
Q

What does it mean when the PeS is greater than 1

A

It’s price elastic

38
Q

What does it mean when PeS is below 1

A

It’s price inelastic

39
Q

List factors effecting PeS

A

Time
Availability of spare capacity
Number of firms in the market
Ability to alter production methods

40
Q

Define equilibrium

A

The price at which demand is equal to supply and there is no tendancy to change

41
Q

Define disequilibrium

A

The price at which the market supply does not equal demand

42
Q

What is it called when QD is greater than QS

A

Shortage

43
Q

What is it called when QS is greater than QD

A

Surplus

44
Q

Define price floor

A

Price floor is a price control typically set by the government that limits the minimum price a company is allows to charge for a product or service.

45
Q

Define price ceiling

A

Price floor is a price control typically set by the government that limits the maximum price a company is allows to charge for a product or service.

46
Q

Define excess supply

A

When quantity supplied at a particular price is greater than the quantity demanded

47
Q

Define excess demand

A

When quantity demanded at a particular price is greater than the quantity supplied

48
Q

Why prices floors may not work

A

Black market
Difficult to monitor
Excess supply

Microeconomics (14 decks)

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