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 and exit
Complimentary goods
Goods in joint demand; these goods are often bought together, e.g. printers and ink cartilages
Composite demand
Demand for a multi purpose good
Condition of demand
A determinant of deman other than the goods price, that sets the position of the goods demand curve
Condition of supply
A determinant of supply other than the goods price, that sets the position of the goods supply curve
Customer sovereignty
Consumers can collectively govern production in a market via exercising spending power. Strongest in perfectly competitive markets
Cross elasticity of demand (XED)
Measures the responsiveness of the goods demand to a change in the price of a different good
Demand
The quality of a good or service that a consumer is willing to buy at a given price, at a given time
Derived Demand
Demand for a good that is the input of another good
Disequilibrium
Excess supply or demand in a market
Effective Demand
Desire for a good or service that is backed by the ability to pay for said good or service
Elasticity
The proportionate responsiveness of a second variable to change in a first variable
Equilibrium
No excess supply or demand in a market; a state of balance between opposing forces
Equilibrium price
The price where planned demand matches planned supply
Excess demand
When consumers want to buy more that producers are willing to sell; occurs below equilibrium price
Excess supply
When producers want to sell more than consumers are willing to buy; occurs above equilibrium price
Exchange
Trading objects of value, utilising media of exchange
Income elasticity of demand
Measure the responsiveness of a good’s demand to a change in the incomes of consumers
Inferior goods
A good for which demand rises as income falls
Joint supply
When one good is produced, another good is also produces from the same materials
Joint supply
When one good is produced, another good is also produced from the same raw materials
Normal good
A good which demand rise as income rise
Price elasticity of supply
Measures the responsiveness of a goods supply to change in price
