Price Determination In A Competitive Market Flashcards
Equilibrium price
The price at which planned demand for a good or service exactly equals planned supply.
Supply
The quantity of a good or service that firms are willing and able to sell at given prices in a given period of time
Demand
The quantity of a good or service that consumers are willing and able to buy at given prices in a given period of time.
Market demand
The quantity of a good or service that all the consumers in a market are willing and able to bug at different market prices.
Effective demand
The desire for a good or service backed by and ability to pay.
The ‘law’ of demand
As a goods price palls, demand rises.
What type of relationship is there between price and demand?
Inverse relationship
What does the horizontal aces represent
Quantity demanded per period of time.
What way does the graph move when there is an increase of demand?
Rightward
What way does the graph move when there is a decrease of demand?
Leftward
What is tea and coffee?
Substitute goods. These are in competing demand. An increase in the price of a substitute good will cause a rightward shift in demand.
What are a cone and ice cream?
Complementary goods have joint demand. A fall in price of a complementary good will cause a rightward shift in the demand curve.
How does disposable income affect demand?
As income increases, demand increases and vice versa.
Advertising increases demand, why?
When an advertising campaign is released, people will think more highly of the product and therefore increase their tastes and preferences for the product.
Population size
This influences total market dice and therefore an increase in population size causes a rightward shift in the demand curve.
