(PAPER 1) 1.2.3 markets Flashcards

1
Q

equilibrium price definition

A

the price where supply and demand are equal

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2
Q

excess supply definition

A

position where supply is greater than demand at a given price and there are unsold goods in the market

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3
Q

excess demand definition

A

position where demand is greater than supply at a given price and there are shortages in the market

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4
Q

increase in demand=

decrease in demand=

A

increase in quantity decrease in price

decrease in quantity increase in supply

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5
Q

increase in supply=

decrease in supply=

A

increase in quantity decrease in price

decrease in quantity increase in price

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6
Q

increase in supply and demand=

A

increase in quantity
(when BOTH demand and supply increase or decrease price stays the same because they have increased or decreased by the same amount)

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7
Q

decrease in supply and demand=

A

decrease in quantity
(when BOTH demand and supply increase or decrease price stays the same because they have increased or decreased by the same amount)

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8
Q

things that affect supply:

A
  • changes in cost of production
  • indirect taxes
  • introduction of new technology
  • external stock
  • government subsidies
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9
Q

things that affect demand:

A
  • changes in prices of substitutes and complimentary goods
  • demographics
  • advertising and branding
  • changes in consumer income
  • fashion tastes and preferences
  • seasonality
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10
Q

the graph

A
supply = /
demand = \
equilibrium price is the point where they meet
inc in supply= / > / P1&Q1 > P2&Q2
dec in supply= / < / 
price
I
I
I
I
I
I\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ Quantity
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