Markets - deffentiions Flashcards
market
any situation where buyers and sellers come together to exchange goods and services for money.
demand curve
a model that illustrates the relationship between the price of a good and the quantity of a good that would be demanded.
demographics
the composition of society in terms of age profile, gender profile or number of people living in a particular area.
external shocks
an event that occurs outside of a business that has a direct impact o production.
subsitiute goods
a good that can act as a replacement for another good.
complimentary goods
those that are jointly demanded. E.g. tennis rackets and balls
supply
the quantities of a good firm are willing to offer to the market at a variety of prices, over a given time period, all other things remain the same.
supply curve
illustrates a relationship between the price of a good and the quantity of that good, businesses are willing to supply to a market.
cost of production
how much it costs a firm to produce a product. it affects the firms willingness to supply units of goods
indirect taxes
taxes (only added when you buy something in a shop) on expenditure (action on spending funds) e.g. VAT (20%). If indirect taxes rise, it raises a firm’s cost of production
subsidies
grants that are given by the government to firms. They lower a firm’s cost of production and therefore incentivise firms to increase production of the good.
subsidies
grants that are given by the government to firms. They lower a firm’s cost of production and therefore incentivise firms to increase production of the good.
disequilibrium
(more supply than can sell) is an unstable position in a market because demand and supply are not equal.
market equlibirum
stable position in a market where there is no incentive for anything to change. (This is because demand equals supply at market equilibrium).
excess demand
demand is greater than supply
price elasticity demand
the responsiveness of demand to a change in the price of a good or a service (if the price changes will the consumer still buy the product).
price elastic
any change in the price of a good or service will lead to a greater than proportional change in QD. This suggests that if demand is price elastic, consumers are sensitive to a price change.
price inelastic
Consumers are not sensitve to price change. any change in price will lead to a less than proportional change in QD.
Income elasticity of demand (YED)
the responsiveness of demand to a change in income.
normal good
goods whereas income rises, QD rises and vice versa.
Inferiror good
if a household is given more income, they will buy less of an inferior good
sales revanue
the value of sale a business generates in a given period of time
variable cost
A cost that varies directly with the amount of output produced e.g. raw materials
