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 a 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. For economists, demand is always effective demand
Effective demand
The desire for a good or service backed by an ability to pay
Market demand
The quantity of a good or service that all the consumers K a. Market are willing and able to buy at difference market prices
Condition of demand
A determinant of demand, other than the goods own price, that fixes the position of the demand curve
Increase in demand
A rightward shift of the demand curve
Decrease in demand
A leftward shift of the demand curve
Normal good
A good for which demand increases as income rises and demand decreases as income falls
Inferior good
A good for which demand decreases as income rises and demand increase as Income falls
Elasticity
The proportionate responsiveness of a second variable to an initial change in the first variable
Price elasticity of demand
Measures the extent to which the demand for a good changes in repair to a change in the price of that good
Percentage change in quantity demanded
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Percentage change in price
Income elasticity of demand
Measures the extent to which the demand for a good changes in response to a change in income; it is calculated by dividing the percentage change in quantity demands by the percentage change in income
Percentage change in quantity demanded
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Percentage change in income
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; it is calculated by dividing the percentage change in quantity demands of one good by the percentage change in the price of the other good
Percentage change in quantity of A demanded
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Percentage change in price of B
Competitive market
A market in which the large number of buyers and sellers possesses good market information and can easily enter or leave the market
