Microeconomics Flashcards
Two types of markets
Factor markets: factors of production
Goods/Product Markets: services and finished goods
Capital markets: where firms raise funds via debt or issuing equity
What factors does demand depend on?
Price of product; Price of substitute product;
What does supply depend on?
cost of production; price of product; cost of labour; cost of other production inputs
Difference between movements and shifts in S/D curves
Movements: along curve, caused by change in price
Shift: cause by changes in independent variables other than price
Types of markets
Factor: factors of production
Goods/Product: finished goods or services
Capital: raising funds via debt or issuing equity
Process of aggregating curves
Add all the supply/demand functions of all the market players. substitute the price of all external variables. then rearrange function to get market supply curve
What is equilibrium?
the price at which the quantity supplied is equal to the quantity demanded
graphically: the point where the demand and supply curves intersect
How do partial equilibrium movements work? Assume ceteris paribas
Excess demand leads to increase in price and movement towards the equilibrium
Excess supply leads to decrease in price and movement towards the equilibrium
What is a stable equilibrium?
there are forces to move price and quantity back to equilibrium if there is a deviation
