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AQA A-level Economics > Micro : Competitive Market > Flashcards

Micro : Competitive Market Flashcards

1
Q

Market definition

A

A place where buyers and sellers come together to determine prices

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2
Q

Movement along the demand/supply curve is caused by

A

Changes in price

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3
Q

Demand definition

A

The quantity of goods or service that consumers are willing and able to buy at a given price and time

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4
Q

Substitute goods definition

A

Goods which are alternative to each other (beef and lamb) More substitutes a good has makes it more elastic

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5
Q

Complementary goods definition

A

Goods that are often used together causing then to be in joint demand

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6
Q

Derived demand definition

A

Demand for a good which is a factor of production in making another good or service

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7
Q

Composite demand

A

When a good or service has more than one use (Wheat, used for bread and biofuels )

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8
Q

Price elasticity of demand definition

A

How the quantity demanded of a good responds to a change in price

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9
Q

Price elasticity of demand formula

A

Percentage change in quantity demanded
——————————————-
Percentage change in price

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10
Q

PED value is usually

A

Negative as demand falls as price increases

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11
Q

PED greater than one means the demand for the good is

A

Elastic as change in price leads to greater change in quantity demanded

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12
Q

PED less than one means the demand for the good is

A

Inelastic as change in price will lead to a small change in quantity demanded

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13
Q

Income elasticity of demand formula

A

Percentage change in quantity demanded
———————————————
Percentage change in income

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14
Q

YED definition

A

the responsiveness of demand for a good to a change in the income of consumers.

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15
Q

XED definition

A

How the quantity demanded of a good responds to the change in price of another good

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16
Q

Cross elasticity of demand formula

A

Percentage change in quantity demanded of good A
——————————————-
Percentage change in price of good B

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17
Q

Factors affecting PED

A

Substitues
Type of good/service
Percentage of income spent
Time

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18
Q

Demand for essential items are price

A

Inelastc

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19
Q

Demand for non-essential items are price

A

Elastic

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20
Q

Normal good definition

A

As income rises demand increases (Goods that have a positive YED)

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21
Q

Luxury Goods

A

YED > 1

22
Q

Inferior good definition

A

As income rises demand falls (negative YED)

23
Q

Positive XED shows that

A

The goods are substitutes as a fall in the price of one substitute decreases demand for the other substitute

24
Q

Negative XED shows that

A

Theses good are complementary as an increase in price will lead to a reduction in demand

25
Q

XED of zero shows that

A

These goods are unrelated

26
Q

Supply definition

A

The quantity of a good/service that producers supply at a given price or time

27
Q

Factors shifting supply

A

Changes to cost of production
Improvement in technology
Changes in productivity during production

28
Q

Joint supply definition

A

Production of one good/service involves the production of another

29
Q

Price elasticity of supply definition

A

How quantity supplied of a good responds to a change in price

30
Q

PES formula

A

Percentage change in quantity supplied
———————————————
Percentage change in price

31
Q

If PES is bigger than 1 the supply of the good is

A

Elastic

32
Q

If PES is less than 1 the supply of the good is

A

Inelastic

33
Q

If there is excess demand/supply the market will be in

A

Disequilibrium

34
Q

Commodity definition

A

A good which can be swapped out with any other good of the same type with a noticeable difference

35
Q

Price mechanism definition

A

Decision of consumers and businesses to determine the allocation of resources

36
Q

What are 3 main functions of price mechanisms

A

Signalling function
Incentive function
Rationing function

37
Q

What is the signalling function

A

Prices rise and fall to reflect scarcities and surpluses

38
Q

What is the ration function

A

Prices are higher when there is a ration of scarce resources when demand is bigger than supply

39
Q

Increase in income will shift demand to the

A

Right

40
Q

Decrease in income will shift demand to the

A

Left

41
Q

Rising price of substitutes will shift demand to the

A

Right

42
Q

Falling price of substitutes will shift demand to the

A

Left

43
Q

Change in taste will shift demand or supply

A

Demand

44
Q

Expected fall in price will shift demand to the

A

Left

45
Q

A rise in the price of complement will shift demand to the

A

Left

46
Q

A fall in the price of complements will shift demand to the

A

Left

47
Q

Necessities tend to be more price

A

Inelastic

48
Q

Goods that with substitutes tend to be price

A

Elastic

49
Q

Determinants of price elasticity

A

Availablity of close substitutes
Percentage of income spent
Nature of the product

50
Q

Determinants of price elasticity of supply

A

Time taken to expand supply
Size of spare capacity
Available stocks
Easy to switch production

51
Q

What is the incentive function

A

Prices rise and producers increase supply as there is an incentive to increase profit

AQA A-level Economics (6 decks)

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