microeconomics supply and demand vocab

Question 1

market

Answer 1

any situation where buyers and sellers come into any contact in order to exchange goods and services

Question 2

demand

Answer 2

the desire to buy a good or service at a given price, backed by the ability to pay for that good or service

Question 3

utility

Answer 3

a measure of the satisfaction/benefit that we get from purchasing and consuming a good or service

Question 4

marginal utility

Answer 4

the change in satisfaction/benefit from consuming an extra unit of a good or service

Question 5

total utility

Answer 5

the total satisfaction/benefit from a given level of consumption of a good or service

Question 6

supply

Answer 6

the quantity of a good or service that suppliers (producers) wish to sell over a range of prices within a time period (week,month,year)

Question 7

determinant of demand

Answer 7

factors that affect the demand for a good or service

Question 8

determinant of supply

Answer 8

the factors that affect the supply of a good or service

Question 9

equilibrium (market clearing)

Answer 9

a state of balance, or a state of rest where opposing forces are equal and there is therefore no tendency to change, ceteris paribus. in free market this is Qs=Qd

Question 10

consumer surplus

Answer 10

the difference between price paid and price consumers are willing to pay

Question 11

producer surplus

Answer 11

the difference between the market price and price charged

Question 12

subsidy

Answer 12

an amount of money given by the gov to a firm for every unit of output, in order to encourage production

Question 13

indirect tax

Answer 13

a tax on expenditure

Question 14

elasticity of demand

Answer 14

the responsiveness of quantity demanded of a product to a change in any of its determinants

Question 15

cross elasticity of demand XED

Answer 15

the responsiveness of quantity demanded for a product to changes in the price of another product = %changeQd(a) / %changeP(b)

Question 16

price elasticity of demand PED

Answer 16

the responsiveness of a quantity demanded for a product to a change in its price %changeQd / %changeP

Question 17

income elasticity of demand YED

Answer 17

the responsiveness of quantity demanded for a product to changes in the price of another product %changeQd / %changeY

Question 18

elasticity of supply

Answer 18

the responsiveness of a quantity supplies of a product to change any of its determinants

Question 19

price elasticity of supply PES

Answer 19

the responsiveness of a quantity supplied of a product to a change in its price %changeQs / %changeP

Question 20

determinants of PED

Answer 20

factors that influence whether the demand for a good or service is elastic or inelastic with regard to a change in the price

Question 21

incidence of tax

Answer 21

burden of tax - how much of the total tax bill is paid by the consumer (consumer burden) and how much is paid by the firm/producer (producer burden)

Question 22

ad valorem tax

Answer 22

tax levied as a % of the value of price of the good

Question 23

wage differentials

Answer 23

the difference in wages between workers with different skills in the same industry or between those with comparable skills in different industries

Question 24

joint supply

Answer 24

an increase or decrease in the supply of one good leads to an increase or decrease in supply of a by-product

Question 25

equilibrium price

Answer 25

the price at the equilibrium point

Question 26

equilibrium quantity

Answer 26

the quantity at the equilibrium point

Question 27

minimum wage

Answer 27

a wage rate below which employers will not pay