Interactions of markets Flashcards
What is meant by Ceteris paribus in economics?
indication of the effect one economic variable has on another, provided all other variables remain the same.
What is market equilibrium?
a market state where the supply in the market is equal to the demand in the market.
What is meant by excess supply?
quantity supplied of a product or service exceeds the quantity demanded at a given price level
What is excess demand?
occurs when the Price of a good is lower than the Equilibrium Price.
What are complements in econ?
a product or service that lifts a customer’s willingness to pay (WTP) for another product or service.
What are substitutes in economics?
a product or service that consumers see as essentially the same or similar-enough to another product.
what change in a market will cause equillibrium price to rise but equillibrium quantity to fall
An increase in supply
what change in a market will cause equillibrium price to fall but equillibrium quantity to rise
increase in the supply of goods and services while demand remains the same
What change in a market will cause both equilibrium price and quantity to rise
An increase in demand
What change in a market will cause both equilibrium price and quantity to fall
A shift in demand or supply curve
List several changes in a market which may cause a contraction in supply?
1) Prices
2) Returns for alternative activities
3) technology
Changes that cause contraction/ extension in demand?
Population income
Changes in taste
complement goods
