The Market Flashcards
Demand.
Amount of a product that consumer are willing and able to purchase at any given price.
Complementary goods.
Goods that are purchased together because they are consumed together. E.g Tv and Sky.
Demand curve
Line drawn in a graph that shows how much of a good will be brought at different prices.
Inferior goods
Goods for which demand will fall if income rises or rise if income falls.
Normal goods
Good is for which demand will rise if income rises or fall if income falls
Substitute goods
Good is that can be bought as an alternative to others but perform the same function
Supply
Is the amount of a product which suppliers will offer to the market at a given price. The higher the price of a particular good or service the more that will be offered to the market
Indirect taxes
Taxes imposed by the government on spending. when they are imposed or increased the supply curve will shift to the left. indirect taxes represent a cost to firms if indirect taxes are reduced the supply curve will shift to the right
Government subsidies
Money to businesses in form of a grant. May be given to firms to try and encourage them to produce a particular product. It increases supply.
Supply curve
A line drawn on a graph that shows how much of a good sellers are willing to supply at different prices.
Equilibrium price or market clearing price
The price with supply and demand are equal
Excess demand
The position where demand is greater than supply at a given price and there are shortages in the market.
Excess supply
Position where supply is greater than demand at a given price and there are unsold goods in the market
Total revenue or total expenditure
The amount of revenue generated from the sale of goods calculated by multiplying price by quantity in a given period of time
Calculation for price elasticities of demand
Percentage change in quantity demanded divided by percentage change in price
Percentage change calculation
New minus old divided by old times by Hundred
Price elastic demand
Change in price results in a greater change in demand
Price elasticities of demand
Responsiveness of demand to a change in price
Price inelastic demand
A change in price results in a proportionately smaller change in demand
Calculation for income elasticities of demand
Percentage change in quantity demanded divided by percentage change in income
Income elasticities of demand
Measures the responsiveness of demand to a change in income
Necessities
Basic goods that consumers need to buy for sample food electricity and water. These goods will be in come in elastic
Luxuries
Good is that consumers like to buy if they can afford them. Spending on these types of goods is discretionary which means it does not have to be undertaken.
Income elastic demand
Percentage change in demand for a product is proportionately greater than the percentage change in income
