Microeconomics Supply And Demand Flashcards
What’s microeconomics
the study of individual units of an economy rather than the whole aggregate economy
What does equilibrium on a graph mean
Market working efficiently and effectively
What causes movements along supply/demand curve
Quantity and price factors
What causes new supply/demand curves
Factors that aren’t quantity or price related
In supply, relationship between price and quantity supplied is _ meaning …
Positive
Upward sloping supply curve
Relationship between price and quantity demanded is _ meaninf …
Negative
Downward sloping demand curve
Factors creating new supply curve. 6
Prices of four factors of production
Efficient utilisation of factors of production
Technological advances
Producer decisions
Gov policies (tax, subsidies, legislation)
Natural conditions
Factors creating new demand curve. 6
Real income (what ppl can afford
Tastes and preferences
Population changes
Demand for substitute and complementary goods
Changes in expectations about future prices
Interest rates
Elasticity of curve meaning
The degree to which demand/supply for a good or service varies with price
Elasticity formula
%change in quantity / % change in price
Types of elasticities
Perfectly elastic
Elastic
Unitary
Inelastic
Perfectly inelastic
Elasticity value of perfect elasticity
Infinity
Elasticity value of elastic
Over 1
Elasticity value of unitary
1
Elasticity value of inelastic
Between 1 and 0
Elasticity value of perfectly inelastic
0
Description of perfectly elasticity curve
Demand/supply falls to zero as result of any price change
Description of elastic
Large change in demand/supply as result of price change
Description of unitary
Percentage change in demand/supply is equal to percent change in price
Description of inelastic
Small change in demand/supply as result of price change
Description of perfectly inelastic
No change in demand/supply as result of price change
Level of elasticity to substitute good
Elastic
Level of elasticity to non substitute good
Inelastic
Level of elasticity to complimentary good
Depends on elasticity of that which is compliments and if complimentary good has substitutes
Level of elasticity to luxury goods
Elastic
Level of elasticity to necessity goods
Inelastic
Level of elasticity to inferior good
Negative elasticity of demand
Level of elasticity to normal good
Positive elasticity of demand
