Price Determination In A Competitive Market Flashcards
Competing supply
When resources can be used to produce one good or another good (not both)
Competitive markets
A market with large numbers of buyers and sellers, with low barriers to entry/exit
Composite demand
Demand for multi-purpose goods
Condition of demand
A detriment of demand other than the good’s price, that the sets the position of the good’s demand curve
Customer sovereignty
Customers can collectively govern production in a market via exercising spending power. Strongest in competitive markets
Cross elasticity of demand (XED)
Measures the responsiveness of a good’s demand to a change in price of another good
Demand
The quantity of a good/service that a consumer is willing and able to buy at a given price, at a given time
Derived demand
Demand for a good that is the input for another good e.g. aluminium and cars
Disequilibrium
Excess supply or demand in a market
Effective demand
Desire for a good/service that is backed by the ability to pay for it
Elasticity
A measured of a variable’s sensitivity to a change in another variable
Equilibrium
No excess supply or demand in a market S=D
Equilibrium price
The price where planned demand matches planned supply
Excess demand
When consumers want to buy more than producers are willing to sell
Excess supply
When producers want to sell more than consumers are willing to buy
