Markets- Micro Flashcards
What is a (free) market economy?
Resource allocation is done by the price mechanism within markets
What two sectors are mixed economies made of?
Market and non market
How are goods and services allocated in the non-market sector?
Produced and delivered to final users outside markets (usually by governments)
What is a market?
The meeting of buyers and sellers
What is a competitive market?
When there is a large number of buyers and sellers
What is the equilibrium price?
The point at which demand and supply are equal
What is supply?
The quantity of a good/service that firms are willing and able to sell
What is demand?
The quantity of a good/service that consumers are willing and able to buy
What is effective demand?
The desire for a good/service that is backed by an ability to pay
What is the law of demand?
As a goods price falls, more is demanded
