Dynamic of Markets Flashcards
Define Perfect Competitive Markets
Many buyers and sellers and nobody dominates the market
Define Imperfect Markets
Few buyers and sellers dominate the market
What is the Law of Demand
If the price of a good or service increases, the quantity demanded decreases, the opposite is also true
What is the Law of Supply
If the price of a good or service increases, the quantity supplied increases, the opposite is also true
What are the five characteristics of a Perfectly Competitive Market
Many buyers and sellers of a product Businesses compete to sell the product No barriers to entry Buyers and sellers have complete information No government intervention
When does an imperfect market exist
When one of the characteristics of a perfect market aren’t met
What is a monopoly
There is only one seller of a good or service
Entry to the market is blocked
What is Monopolistic Competition
Many sellers selling different product
Entry to the market is fairly easy
What is an Oligopoly
When there are a few sellers who are able to collude with one another to fix the price or divide the market.
Entry to the market is very difficult
What is utility
The satisfaction we get from a good or service
What is the law of diminishing marginal utility
The more we have of something, the less utility we get from consuming more units
What is the value of a good or service
The satisfaction or utility we derive from it
What are the 7 determinants of demand
Price Income of Households Tastes and preferences of households Number of households Price of related goods (Compliments and substitutes) Weather Expected Prices
What are the 7 non-price determinants of demand
Income of a household Tastes and Preferences Substitutes Complements Number Of Households Expected Prices Weather
What is Supply
The quantities of a good or service that suppliers plan to sell at each possible price
