Supply and Demand Flashcards
What is demand?
Demand is a good or service that a customer is willing to purchase.
What is effective demand?
Effective demand is the desire to purchase a product supported by the ability to pay.
What is a market economy?
Majorly private businesses (America)
What is a planned economy?
Majorly public businesses (China)
What is a mixed economy?
A mix of public and private businesses (UK)
What are the 2 laws of demand?
1) Demand decreases when price increases
2) Demand increases when price decreases
What are the 2 laws of supply?
1) Supply increases when price increases
2) Supply decreases when price decreases
What is the formula for calculating PED and YED?
% change in x
What does it mean if a product is perfectly inelastic?
The customer is always willing to pay, whatever the price.
How can you tell via the formula result that a product is inelastic?
Between -1 and +1
How can you tell via the formula result that a product is perfectly inelastic?
0
How can you tell via the formula result that a product is elastic?
Less than -1 or more than +1
What determines if a good is normal or inferior?
Normal = demand increases when income increases Inferior = demand decreases when income increases
For what 2 reasons is YED relevant to businesses?
1) Wealthier countries can have higher prices
2) Global standards increasing cause a decline in inferior goods
What are the problems of PED?
Market is dynamic and depends on the state of the economy
