Microeconomics- demand and supply Flashcards
What is “real demand/effective demand”?
Desire that is backed up by an ability to pay
What are substitute goods?
Goods and services with similar uses in competition with each other
What are complimentary goods?
Goods that are consumed or purchased together
What is composite demand?
Some products are used for more than one purpose, as demand increases for one use it can’t be used for another use
What is derived Demand?
When demand for one good comes from the demand for another good. Occurs when a good is necessary to produce other goods
What is speculative demand?
When demand changes as people try and predict future prices and supply
What is PED?
Price elasticity of demand- a measurement of the responsiveness of demand to a change in the price of a product
PED= (%∆ quantity demanded)÷(%∆ price)
What is elastic, and inelastic demand?
Elastic- A price change leads to a proportionally greater change in quantity demanded
Inelastic- A price change leads to a proportionally lesser change in quantity demanded
What is unitary elasticity?
The price change is equal to the change in quantity demanded
What’s the difference between Normal goods and Inferior goods?
Normal goods- when income increases demand for normal goods increases
Inferior goods- when income increases demand for inferior goods decreases
What is XED?
Cross elasticity of demand- a measurement of how demand for one good changes in response to changes in the price of another good
What is YED
Income elasticity of demand- a measurement of the responsiveness of demand to a change in income
What is PES?
Price elasticity of supply- a measurement of the responsiveness of supply of a good to a change in price of the good
