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Micro-Econ Assessment (AS) > PRICE DETERMINATION + COMPETITIVE MARKETS > Flashcards

PRICE DETERMINATION + COMPETITIVE MARKETS Flashcards

1
Q

Define demand

A

The quantity of a good or service that consumers are willing and able to buy at given prices in a given period of time

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2
Q

Define supply

A

The quantity of a good or service that producers are willing and able to sell at given prices in a given period of time

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3
Q

What is a competitive market

A

Markets in which a large number of sellers possess necessary information and with no barriers to entry

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4
Q

Examples of barriers to market entry

A

Patent protections
Consumer loyalty
->High switching costs (worsen impact)
Tax benefits to existing firms

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5
Q

What is the equilibrium

A

The price where planned demand equals planned supply (ruling market price)

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6
Q

3 Types of demand

A

Effective
Market
Individual

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7
Q

What is effective demand

A

The consumer desire for a good backed up by the ability to pay

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8
Q

What is market demand

A

The quantity of a good or service where ‘all’ the consumers in a market are willing and able to buy at different market prices

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9
Q

What is individual demand

A

The quantity of a good or service that a particular consumer or individual is willing and able to buy at different market prices

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10
Q

What is the condition of demand

A

A determinant of demand, other than price, that fixes the position of the curve

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11
Q

What are the determinants of demand

Shift causing

A

Population
Advertisement
Substitutes price
Income
Fashion/ Trends
Interest rates
Complements price

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12
Q

Define a normal good

Examples

A

A good for which demand increases as income rises and decreases when incomes fall

High quality food, clothing and appliances

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13
Q

Define a luxury good

A

A good for which the proportion of demand change is grater than the income change

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14
Q

Define a inferior good

Examples

A

A good where demand decreases as income rise

Unbranded food, clothing, appliances

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15
Q

What are Veblen goods

A

High quality goods that provide a status symbol also known as positional goods

Ferrari, Rolex

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16
Q

Define PED

A

Measures the extent to which demand for a good changes in response to a change in price

17
Q

What are the determinants of PED

A

Substitutes (no.)
Percentage of income spent
Luxury or necessity
Addicitve or habitual
Time period

18
Q

Define the shot-run with regard to PED

A

The time period in which at least one factor of production is fixed and cannot be varied
-> Takes time to respond to price change = inelastic

19
Q

Define the long-run with regard to PED

A

The time period where no factors of production are fixed and all factors can be varied

20
Q

What is YED

A

Income elasticty of demand measures the extent to which demand changes in response to a change in income

21
Q

What is XED

A

Cross elasticity of demand measures the extent to which the demand for a good changes in response to a change in the price of another good

22
Q

Meanings of XED coefficients

+,-,1,-1

A

+ve = substitutes
-ve = complementary
1= strong sub
-1= strong comp

23
Q

Define market supply

A

The quantity of a good or service that all firms in a market plan to sell at given prices in a given period of time

24
Q

What is the condition of supply

A

A determinant of supply other than the goods own price that fixes the position of the curve

25
Q

What are the determinants of supply

A

Productivity
Indirect Tax
No. of firms
Technology (progress)
Subsidy
Weather
Costs of production

26
Q

Examples of costs of production

A

Transport
Labour
Utilities
Raw materials
Regulation (Taxes, VAT)

27
Q

What is PES

A

Measures the extent to which the supply of a good changes in response to a change in price

28
Q

Determinants of PES

A

Production Lag
Stocks
Spare capacity
Substitutibility of FoPs
Time period

29
Q

Define market equilibrium

A

Where planned demand = planned supply (point)

30
Q

Draw an excess supply graph

A
31
Q

Draw an excess demand graph

A
32
Q

Define joint supply

Shown?

A

A product or process that can yield two or more outputs.

PPF

33
Q

Define competitive demand

A

When a good is viewed by a consumer as an alternative

34
Q

Define composite demand

Related?

A

Where demand for a good that has more than one use

Competing supply

35
Q

What is dervied demand

Examples

A

Demand for a good or service that is a consequence for something else

Oil

Micro-Econ Assessment (AS) (6 decks)

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