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Microeconomics Y12 > Supply And Demand > Flashcards

Supply And Demand Flashcards

1
Q

Define demand

A

The quantity of a product that consumers are willing and able to purchase at various prices over a period of time

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2
Q

Effective demand

A

Quantity of a good or service that consumers are actually buying at the current market price

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3
Q

What relationship is there between price of a product and the quantity demanded

A

An inverse relationship

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4
Q

What do rational customers look to do

A

Wish to maximise satisfaction or utility from consumption by correctly choosing how to spend their limited income

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5
Q

Two types of goods

A

Inferior

Exceptional

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6
Q

Substitution effect

A

Describes the change in demand for a product when it’s relative price changes

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7
Q

Income effect

A

A fall in price increases the real purchasing power of consumers- allows people to buy more with a given budget

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8
Q

Demand curve

A

Relationship between the quantity demanded and the price of the product

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9
Q

Demand schedule

A

Data used to draw the demand curve for the product

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10
Q

What way does the demand curve slope and why

A

Downwards from left to right due to the law of demand

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11
Q

What is the law of demand

A

At higher prices less will normally be demanded than at lower prices

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12
Q

Determinants of demand

A

Consumers RDI
Substitutes
Complements
Change in tastes and fashions

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13
Q

Disposable income

A

Income after taxes

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14
Q

Real disposable income

A

Income after tax and distorting effects of inflation

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15
Q

Consumer surplus

A

The extra amount a consumer is willing to pay for a product above the price they actually do pay

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16
Q

Price discrimination

A

The action of selling the same product at different prices to different buyers- to maximise sales and profits

17
Q

Diminishing marginal utility

A

The more of something we consume the less likely we are to want more of it

18
Q

Law of supply

A

At higher prices we would expect more to be supplied

19
Q

Production

A

The process of turning inputs of scarce resources into an output of goods or services

20
Q

Define supply

A

The willingness and ability of firms to produce a given quantity of output in a given period of time, or at a given point in time, and take it to market

21
Q

Why do supply curves slope upwards

A

Supply comes from businesses
Businesses are driven by profit
At higher prices, higher profit margins
Supply is higher at higher prices

22
Q

Factors affecting supply

A 
Availability of factors 
Cost of factors 
Technology 
Taxes
Subsidies 
Weather and natural factors
23
Q

What is the golden rule?

A

Business Taxes affect supply not demand

24
Q

Producer surplus

A

The difference between what producers are willing and able to supply a good for and the price they actually receive

25
Q

Total surplus

A

Total gain to society from the production and consumption of a good

26
Q

Equilibrium

A

State of physical balance

27
Q

What are the 3 main resources

A

Land
Labour
Capital

28
Q

How does the free market allocate resources

A

Through supply and demand

29
Q

What is supply and demand like in a planned economy

A

No supply or demand

Gov decides how to divide up resources

30
Q

Advantages of planned economies in relation to supply and demand

A

Can control where to put resources

31
Q

Disadvantages of planned economies in relation to supply and demand

A

No competition to drive up quality or to keep costs down

32
Q

What is supply and demand like in a mixed economy

A

Individuals decide how much they want to make, offer
Market forces will dictate the right number
Gov intervenes to provide key services

33
Q

What are economic resources

A

Goods or services available to individuals and businesses used to produce consumer products

Microeconomics Y12 (7 decks)

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