Key Terms 1.2-The Market

Question 1

Definition of Demand

Answer 1

Quantity of particular food that will be purchased at a particular price in a particular time period

Question 2

Definition of Demand curve

Answer 2

Plotting a series of points showing how much of a product would be demanded at a range of different price levels

Question 3

Definition of complementary goods

Answer 3

Used to accompany another product e,g hotel+ flight

Question 4

Definition of substitute goods

Answer 4

Similar rival product that consumers may choose instead

Question 5

Definition of normal goods

Answer 5

Means an increase in income causes a fall in demand- good with a negative income elasticity of demand (YED)

Question 6

Definition of supply

Answer 6

Quantity offered for sale by the manufactures

Question 7

Definition of supply curve

Answer 7

Plotted- showing how much of a product businesses are willing to supply at a range of price levels

Question 8

Definition of subsidy

Answer 8

When government wants to encourage the supply of a product- may offer subsidies to businesses- cuts cost of production- increase supply

Question 9

Definition of equilibrium price

Answer 9

Describes a situation in a market where supply &a demand are balanced- making the price stable

Question 10

Definition of excess demand

Answer 10

Where the demand for a product doesn’t reach the supply of the product

Question 11

Definition of excess supply

Answer 11

Where the price of the quantity supplied doesn’t reach the quantity demanded that price

Question 12

Definition of price elasticity of Demand

Answer 12

Measures the responsiveness of demand for a product to a change in its price

Question 13

Definition of price elastic demand

Answer 13

Those that have alternatives and aren’t necessities- if price decreases demand decreases

Question 14

Definition of price inelastic demand

Answer 14

No alternatives & are a necessity- price increases not much change in demand

Question 15

Definition of income elasticity of Demand

Answer 15

Measures the responsiveness of demand for a product to a change in real incomes

Question 16

Definition of income elastic demand

Answer 16

Change in income & a change in demand which is proportionally greater than the change in income, said to be income elastic

Question 17

Definition of income inelastic demand

Answer 17

Change in income &a a change in demand which is proportionally less than the change in income