Dynamics of market

Question 1

Perfectly competitive markets

Answer 1

Many buyers and sellers of same product. Nobody dominates market.

Question 2

Imperfect market

Answer 2

Few buyers or seller dominate the market.

Question 3

Utility

Answer 3

Satisfaction we get from consuming goods or services

Question 4

Demand

Answer 4

quantity of good/service people are willing and able to buy

Question 5

Law of demand

Answer 5

as price of goods and services increases, quantity demanded decreases (vice versa)

Question 6

Demand curve

Answer 6

Shows relationship between the price of a good/service and the quantity demanded for it.

Question 7

Substitutes

Answer 7

Goods that can be used in place of another good

Question 8

Complements

Answer 8

Goods that are used together

Question 9

Supply

Answer 9

quantity of good/service that suppliers are willing to supply.

Question 10

Law of supply

Answer 10

as price of good/service increases, the quantity supplied will increase(vice versa)

Question 11

Equilibrium

Answer 11

quantity of good or service demanded is equal to quantity supplied

Question 12

Non-price factors

Answer 12

factors other than price of good/service that effect supply/demand

Question 13

Supply curve

Answer 13

shows relationship between price of good/service and quantity supplied

Question 14

What must there be for a market to exist

Answer 14

At least one buyer and one seller

Question 15

3 types of market + eg

Answer 15

Local market
(corner store)
National market- buyers spread across a nation (cellular market)
International market- Buyers throughout the world
(gold market in London)

Question 16

what is market structure broadly divided into

Answer 16

Broadly divided into perfect and imperfect market

Question 17

Entry into Perfectly competitive market (PCM) is …

Answer 17

easy (no barrier to entry)

Question 18

Is there government intervention in PCM

Answer 18

No and factors of production are mobile

Question 19

Monopoly

Answer 19

Only one seller of a good/service – can therefore fix price. Entry into this market is usually blocked

Question 20

Monopoly

Answer 20

Only one seller of a good/service – can therefore fix price. Entry into this market is usually blocked

Question 21

Monopolistic competition

Answer 21

exists when many sellers selling different variations of the same product. Some control over price. Entry fairly easy.

Question 22

Oligopoly

Answer 22

Few sellers who are able to collude with one another to fix price or to divide the market. Entry very difficult.

Question 23

Law of diminishing marginal utility

Answer 23

The more we have a good or service the less utility we get from consuming extra units.
(As you eat more burgers, after each burger your satisfaction will decrease)

Question 24

3 conditions needed for demand to exist

Answer 24

• people must want and need it
• Must have the necessary purchasing power
• Must be willing to pay for it.

Question 25

what are determents of demand

Answer 25

Factors that influence demand

Question 26

Main determents of demand (7)

Answer 26

• Price
• Income
• preferences
• number of households
• price of related goods
• weather
• expected prices

Question 27

Non price detriments of demand (4)

Answer 27

• Income of households
• preferences
• number of households
• price of related goods

Question 28

What happens of price of substitute decreases

Answer 28

Demand of other good decreases and demand for sub increases

Question 29

what happens when the price of complement goods increases

Answer 29

the demand for other good decreases

Question 30

What happens if number of households increases

Answer 30

Demand curve for product shift right (increases)

Question 31

effect of expected prices

Answer 31

if consumers expect price of good to go up they will buy that good now rather than in the future. Demand increases

Question 32

Detriments of supply (6)

Answer 32

• price of a good/service
• price of inputs
• price of alternative goods
• Tech needed to make good
• number of suppliers
• weather

Question 33

Non-price detriments of supply

Answer 33

• cost of production
• price of alternative goods
• tech needed to make goods
• number of suppliers

Question 34

Increase in cost of production causes what to supply?

Answer 34

Supply curve shifts left. Decrease in supply.

Question 35

technological advances effects supply in what way

Answer 35

Increase in supply. Shift right.

Question 36

Increase in suppliers effects supply in what way?

Answer 36

Increase in supply. Shifts right

Question 37

At what point does the plans of buyers match the pans of sellers

Answer 37

At the market equilibrium

Question 38

What exists at any price above the equilibrium

Answer 38

excess supply (surplus)

Question 39

What happens to the price of a good whilst there is a surplus of supply

Answer 39

The price of the good will decrease

Question 40

What exists at any price below the equilibrium

Answer 40

An excess of demand

Question 41

What happens to the price of a good as long as there is a shortage of goods

Answer 41

The price of that good will increase.

Question 42

When does a change in demand occur

Answer 42

when there is a change in any of the non-price detriments of demand

Question 43

Change in demand can result in a …

Answer 43

new equilibrium position (E1)

Question 44

when does a change in supply occur

Answer 44

when there is a change in any of the no-price detriments of supply.

Question 45

change in supply can result in a …

Answer 45

new equilibrium point (E1)

Question 46

3 functions of markets

Answer 46

Allocation of resources
Bringing supply and demand together
Self-regulation

Question 47

how are prices determined

Answer 47

through the interaction of supply and demand

Question 48

What leads to efficient allocation of resources

Answer 48

profit maximization and utility maximisation

Question 49

what does self regulation ensure

Answer 49

that prices are set in such a way that resources are allocated efficiently