Microeconomics Demand&Supply Flashcards
What is the economic problem?
The situation by which there are scarce resources and unlimited needs and wants
What is opportunity cost?
The value of the next best alternative forgone when a choice is made
law of demand definition
demand varies inversely with price. Higher prices reduce demand and lower prices make products more affordable for consumers so demand increases
demand definition
the quantity that consumers are willing and able to buy at a given price in a given period of time
what is a normal good?
As income rises, demand rises e.g. entertainment
what is an inferior good?
as income rises, demand falls e.g. own brand food
what is a substitute good?
As the price of good X rises, the demand of good Y increases
what is a complementary good?
As the price of good X rises, the demand for good Y will fall e.g. cereal and milk
what is derived demand?
the demand for a factor of production that is used to produce another good or service e.g. an increase in demand for cinema tickets, increases demand for cinema workers
what is joint demand?
when the demand for one product is directly and positively related to market demand for a related good or service e.g. cars and petrol
what is composite demand?
where goods can have more than one use e.g. milk can be processed into a wide range of dairy products
what is the law of supply?
an increase in price leads to an increase in supply due to the incentive of profit, increased price also covers and increase in costs of production to cover the extra output
definition of supply
the quantity of goods producers are willing and able to supply at a given price
what is market supply?
the total amount of an item producers are willing and able to sell at different prices, over a given period of time
