Market Equilibrium (check powerpoint as well) Flashcards
What is the definition of a market?
Where buyers and sellers meet to trade or exchange products
What is the usual exchange medium in markets?
Money
What is the definition of demand?
the quantity that purchasers are willing and able to buy at a given price in a given period of time.
What is the requirement for demand to become effective?
if demand for a product is backed up by a willingness and ability to pay the market price
What is the basic law of demand?
demand varies inversely with price
What type of relationship is there between price and quantity demanded?
Negative
What is maximisation behaviour?
seeking to maximise something, and basing all their decisions around getting the maximum of that thing
What do firms aim to maximise?
Profit
What is the definition of supply?
the quantity of a good or service that a producer is willing and able to supply onto the market at a given price in a given time period.
What is the basic law of supply?
as the price of a product rises, so businesses expand supply to the market.
What type of relationship is there between price and quantity supplied?
Positive
What is equilibrium price?
price is where demand equals supply
What is excess supply?
Where supply is greater than demand, there is
What is excess demand?
Where demand is greater than supply, there is
What causes movement along a curve on a diagram representing a market?
A price change
