Supply and Demand Flashcards
What is a market
a group of buyers and sellers of a particular good/service
what are competitive markets
Markets with many buyers and sellers. Each has an insignificant impact on market prices eg coffee market, chains and independent coffee shops
what is perfect competition
products are the same, there are many buyers and sellers, they don’t influence prices just take them as they are ‘price takers’
what is monopoly
one seller who controls the price eg irish rail, magazines
what is oligopoly
few sellers, not always aggressive competition eg air travel, supermarkets
what is monopolistic competition
many sellers, slightly different products, each seller can set their own price eg restaurants, hairdressers, clothing
which is the easiest type of competition to analyse
Perfect competition
what is quantity demand
the amount of a good that buyers are willing and able to purchase
what is the law of demand
the quantity demand falls when the price of the good rises
price is always on what axis
y-axis
quantity is always on what axis
x-axis
what is the demand schedule
a table that shows the relationship between the price of the good and quantity demand
what four things influence demand
income, prices of other goods and services, tastes and preferences, expectations
what are normal goods
when your income increases, you’ll have more demand for these goods
examples of normal goods
eating out, tesco’s finest
what are inferior goods
when your income increases, you’ll have less demand for these products
examples of inferior goods
pot noodles, public transport, tesco’s value range
what are substitute goods
two goods for which an increase in the price of one leads to an increase in demand for the other
examples of substitute goods
netflix and cinema tickets
what are complementary goods
two goods for which an increase in price for one leads to a decrease in demand for the other
examples of complementary products
cereal and milk// printers and toners
difference between a movement and a shift along the demand curve
a movement is along the existing line, a shift moves the curve to the right or left depending on the circumstances
shift to the right means
more demand
shift to the left means
less demand
reasons the demand curve may shift
change in consumer income, prices of related goods
what is market demand
sum of all individual demand for a good/service
as income increases, demand for a normal good will increase, how do we show this on a demand curve~
shifts to the right
as income increases, demand for an inferior good will decrease, how do we show this on a demand curve~
shifts to the left
why might a supply curve plateau
production constraints eg reached max amount of productivity
what is supply schedule
a table that shows the relationships between the price of the good and the quantity supplied
what is market supply
the sum of all individual producer supplies for a particular good/service
what causes shifts in the supply curve
cost of production, prices of other goods, natural and social factors, input prices, number of sellers, expectations
how would cost of production make a shift in the supply curve
eg advanced technology might increase productivity, meaning more can be produced for less inputs, the price may fall and the quantity supply is higher
prices of other goods may shift supply curve how
flexibility of producers could allow them to switch to a more profitable business, eg from dairy to aerable farming
examples of natural factors that could cause a shift in the supply curve
natural disasters, weather
examples of social factors that could cause a shift in the supply curve
changing attitudes
examples of inputs
labour, land, capital
why might input prices cause a shift in the demand curve
if input prices rise, production becomes less profitable and firms may supply less of the good
how might number of sellers affect the supply curve
entry and exit of firms into/out of the market can cause shifts
what happens to the supply curve when there are lots of suppliers in the supply curve
it shifts to the right as there will be more supply
what does expectations of production mean
what the supplier expects to be the future state of the market
example of future expectations of the market and how it will affect the supply curve, how will firm react
if demand is expected to increase (shift to right), producers may invest in extra land/technologies to account for this in the future
Once maximum possible supply is reached can quantity supplied increase
No
What is fixed supply
When the supply of a product cannot be changed in the shirt run no matter the price eg perishable goods eg fish, concert ticket
