Micro Demand And Supply Flashcards
What is individual demand?
Willingness + ability of an individual to buy a good or service for a certain price at a given point in time
What is market demand?
Willingness + ability of all consumers in a market to buy a good or service for a given price at a given point in time
What is latent demand?
Consumers are willing to buy something but don’t have the funds
Explain the relationship between price and quantity demanded
When the price increases there is a contraction in the quantity demanded
When price decreases there is an expansion or extension in the quantity demanded
What is joint demand?
Demand for goods that are interdependent (demanded together) e.g. printer and ink
What is composite demand?
Demand for a good that has multiple uses e.g. milk can be used for butter, cream, cheese
What is competitive demand?
Demand for goods that are in competition with each other (known as substitute goods) e.g. Coca Cola and Pepsi
What factors lead to a shift of the demand curve?
Change in consumer income
Change in preferences
Change in price of substitute goods
Change in price of complementary goods
Population changes
Advertising
Explain the difference between a movement along and a shift of the demand curve
Movement along the demand curve represents the impact of a change in price of quantity demanded
A shift of the demand curve means that at the same price, consumers are willing to buy less/ more
Define demand
Willingness and ability of consumers and individuals to buy a good or service at a given price at a given point in time
What is an opportunity cost?
Value of the next best alternative for gone
What is a subsidy?
Giving money to a company so they can produce more
What is market equilibrium?
A situation that occurs in a market when the price is such that the quantity that consumers wish to buy is exactly balanced by the quantity that firms wish to supply
What is comparative static analysis?
Examines effect of equilibrium of a change in external conditions affecting a market (changes to equilibrium)
What are interrelationships of markets?
Changes in one market are likely to affect other markets
What is a normal good?
When consumers increase their demand for goods as their income increases (tend to base demand + supply on)
What’s an inferior good?
When consumers decrease their demand for goods as their income rises e.g. bus travel
What is speculative demand?
Potential buyers are interested not just in satisfaction they may got from consuming the product but also potential risk in market price leading to capital gains on profit
What is ostentatious consumption?
Some goods are luxurious items where satisfaction comes from knowing both the price of the good and being able to flaunt consumption (demand curve upward sloping)
What is a hidden good?
Special sort of inferior good consumption increasing as prices increases. As the price of a staple good goes up e.g. potatoes. Poor people would have little money left to buy other foods so would instead increase their e spending on staple item
What is consumer surplus?
The difference between the price consumers are willing and able to pay and the price they actually pay
What is producer surplus?
Difference between the price producers are willing and able to accept and the price they actually receive
Mini paragraph to memorise about shifting curves
‘Factor’ causes and an (outward/inward) shift of the demand curve from (d to d1/d1 to d)
As a result price (increases/decrease) from (p to p1)
This causes a movement along the supply curve and supply (extends/ contracts)
As a result quantity traded (increases/ decreases) for (q to q1)
What is a market?
Exchange of goods and services, producers and consumers interact
What is a trade off?
A situation where making one choice means losing something else, usually forgoing a benefit or opportunity
What is individual supply?
Willingness and ability of an individual firm to provide a specific quantity of a good or service to a market at a set price at a given point in time
What is market supply?
Willingness and ability of all sellers within a market to provide a specific quantity of a good or service to a market at a set price at a given point in time
What is the relationship between price and quantity supplied?
There is a positive relationship between price and quantity supplied
As the price of a good increase the quantity supplied increases
An increase in the price will cause an extension of the supply curve; a decrease in price will cause a contraction of a supply curve
What is joint supply?
Where a firm produces more than one product together e.g. cows can be used for milk, beef
What is competitive supply?
Where a firm can use its factors of production to produce alternative products E.G.farmer can produce carrots or potatoes
What factors cause a supply curve to shift?
Changes in cost, technology, taxes and subsides, price of other goods, expected prices, number of firms in the market
