Demand + Supply Flashcards
Key terms
Demand
The amount of a good/service that customers are willing and able to buy at any given price.
Supply
The amount of a good/service that sellers are willing and able to sell at any given price.
Equilibrium Price
The situation in a market where demand is equal to supply i.e. both parties are happy. Customers can buy what they want and shops have no unsold stock.
Elasticity Of Demand
Measures how sensitive quantity demanded is to a change in price.
Inelastic Demand
QD is insensitive to a change in price. It will not change significantly. There aren’t any substitutes and it’s a necessity. E.g. Petrol because it is a necessity.
Elastic Demand
QD is sensitive to price, it will go up/down significantly. They have many substitutes or are a luxury. E.g. A Newspaper as their are substitutes.
Complement
A product that is in conjunction with another e.g DVD player and DVDs.
Substitute
An alternative product that serves the same purpose.
Wealth
How much someone is worth, including the value of their house is owned. Value of all assets.
Income
The money coming in from working.
Demographics
Characteristics of the human population.
Tax
An amount of money paid to the government.
Subsidy
Payment from the government to businesses to insentify demand.
Excess Supply
If the price is set too high, excess supply will be created.
Excess demand (shortage)
Created when price is set below the equilibrium price. Because the price is so low, too many consumers want the good while producers are not making enough of it.