Microeconomics Flashcards
Market
where people willing and able to purchase a good, service or resource interact and carry out an exchange with those who are willing and able to provide that same good, service or resource.
Demand
the quantity of a good or service that consumers are willing and able to purchase at a given price during a specific time period, ceteris paribus.
Non-price determinants of demand (8)
- Income
- Price of related goods
- Tastes & Preferences
- Demographics
- Future expectations
- # of potential buyers
- Gvmnt policy
- Seasonal changes
Normal vs Inferior goods
Normal: As income inc, demand inc
Inferior: As income inc, demand dec
Substitute goods
Goods which have similar characteristics and uses to the consumer.
When P of one inc, D of the other inc
Complementary goods
Goods that are consumed together (ink and printers)
Supply
The quantity of a good or service that producers are willing/able to produce at a given price at a specific point in time
Non-price Determinants of Supply (6)
- Cost of production
- Technological change
- Prices of related goods
- Future expectations
- Gvmnt intervention
- # of firms in market
Factors of Production (4)
Land: Something you can’t produce
Labour: Human factor
Capital: Machinery/tools
Entrepreneurship: Ideas&Funding
Opportunity Cost
The cost of the next best alternative to the choice you made
Joint Supply
When 2+ goods are derived from the same product so that one can’t be produced without the others (e.g cow meat and leather)
Linear Demand Function
Qd = a-bP ; where
Qd = quantity demanded P = price a = the Q-intercept (meaning the value of Q when P = 0) –b = the slope, calculated as ΔQd / ΔP
Linear Supply Function
Qs = c + dP ; where
Qs = quantity supplied P = price c = the Q-intercept (meaning the value of Q when P = 0) d = the slope, calculated as ΔQs / ΔP
Producer Surplus
the difference between the lowest price producers were willing and able to offer the good at, and the actual price that they end up receiving for it.
Consumer surplus
the difference between the highest price consumers were willing and able to pay for a good, and the actual price they end up paying
Elasticity
a measure of the responsiveness of the quantity demanded or supplied of a good or service, to changes in any of the factors that determines it.
Types of elasticity (4)
Price elasticity of demand (PED)
Cross elasticity of demand (XED)
Income elasticity of demand (YED)
Price elasticity of supply (PES)
PED
Price elasticity of demand (PED) is a measure of the responsiveness of the quantity demanded of a good or service to changes in its own price.
Factors of PED (4)
- Availability of substitutes (more –> elastic, V/V)
- Urgency or need for product (more –> inelastic, V/V)
- Proportion of income (more –> elastic, V/V)
- Time span (SR–>inelastic, LR–> elastic)
