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Economics > The price system and the microeconomy (AS level) > Flashcards

The price system and the microeconomy (AS level) Flashcards

1
Q

Price mechanism

A

the means of allocating resources ina market economy

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2
Q

Consumers

A

individuals or households who buy goods and services for their own use or for others

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3
Q

Market

A

where buyers and sellers get together to trade

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4
Q

Demand

A

the quantity of a product that consumers are willing and able to buy at different prices per period of time other things equal, ceteris paribus

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5
Q

Supply

A

the quantity of a product that producers are willing and able to sell at different prices within a time period, other things equal, ceteris paribus

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6
Q

Supply chain

A

all the stages of a product’s progress from raw materials, production and distribution until it reacher the consumer

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7
Q

Notional demand

A

where buyers may want to buy a product but which is not always backed up by the ability to pay

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8
Q

Effective demand

A

demand that is supported by the ability to pay

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9
Q

Demand curve

A

a line plotted on a graph that represents the relationship between the quantity demanded and the price of a product

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10
Q

Market demand

A

the total amount demanded by consumers

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11
Q

Demand schedule

A

the data from which a demand curve is drawn on a graph

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12
Q

Movement up and down a demand curve

A

shows how quantity demanded responds to a change in price.

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13
Q

Normal goods

A

where the quantity demanded increases as income increases

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14
Q

Inferior goods

A

where the quantity demanded increases as income decreases

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15
Q

Substitute

A

an alternative good

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16
Q

Complement

A

a good consumed with another

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17
Q

Joint demand

A

when two goods are consumed together

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18
Q

Supply curve

A

a line plotted on a graph that represents the relationship between the quantity supplied and the price of the product

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19
Q

Supply schedule

A

the data from which a supply curve is drawn on a graph

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20
Q

Subsidies

A

direct payments made by the government to producers of goods and services

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21
Q

Indirect tax

A

a tax levied on goods and services, such as general sales tax

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22
Q

Extension of demand or supply

A

an increase in the quantity demanded or quantity supplied

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23
Q

Contraction of demand or supply

A

a decrease in the quantity demand or quantity supplied

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24
Q

Elasticity

A

a numerical measure of responsiveness of one variable following a change in another variable ceteris paribus

25
Q

Elastic

A

where the relative change in the quantity demanded is greater than the change in price, income or the prices of substitutes and compliments

26
Q

Inelastic

A

where the relative change in the quantity demanded is less than the change in price, income or the price of substitutes and complements

27
Q

Price elasticity of demand (PED)

A

measures of the responsiveness of the quantity demanded for a product following a change in the price of the product,

28
Q

Price elastic

A

when the relative change in the quantity demanded is greater than the change in price of the product

29
Q

Price inelastic

A

when the relative change in quantity demanded is less than the change in price of the product

30
Q

PED calculation

A

% change in quantity demanded / % change in price

31
Q

Perfectly inelastic

A

where a change in price has no effect on the quantity demanded

32
Q

Perfectly elastic

A

where all that is produces is sold at a given price

33
Q

Unit elasticity

A

where the change in price is relatively the same as the change in quantity demanded

34
Q

Income elasticity of demand (YED)

A

measures the responsiveness of the quantity demanded for a product following a change in income

35
Q

Necessity good

A

a type of normal good with a YED that is close to 0

36
Q

Superior good

A

a good with a YED greater than 1

37
Q

Cross elasticity of demand (XED)

A

measures the responsiveness of the quantity demanded for one product following a change in the price of another product

38
Q

YED calculation

A

%change in quantity demanded / % change in income

39
Q

XED calculation

A

%change in quantity demanded of product A / % change in the price of product B

40
Q

Price elasticity of supply (PES)

A

a numerical measure of the responsiveness of the quantity supplied to a change in the price of the product

41
Q

Price elastic supply

A

the quantity supplied responds more than proportionately to a change in its price

42
Q

Price inelastic supply

A

the quantity supplied responds less than proportionately to a change in its price.

43
Q

PES calculation

A

%change in quantity supplied / % change in price

44
Q

Equilibrium

A

where demand and supply are equal

45
Q

Disequilibrium

A

a situation where demand and supply are not equal in the market

46
Q

Equilibrium price

A

the price where demand and supply are equal,where the market clears

47
Q

Equilibrium quantity

A

the amount that is traded at the equilibrium price

48
Q

Changes in demand (or supply)

A

when there is a shift in the demand (supply) curve due to a change in factors other than the price of product

49
Q

Excise duties

A

a specific tax that is levied on goods such as cigarettes

50
Q

Ad valorem tax

A

a tax that is charged as a given percentage of the price

51
Q

Derived demand

A

where the demand for a good or service depends upon the use that can be made from it

52
Q

Joint supply

A

when two items are produces together

53
Q

Rationing

A

where the producer limits the supply of products in the market to ensure the products remain exlusive

54
Q

Signalling

A

where decisions taken by buyers or sellers are determined by the price

55
Q

Transmission of preferences

A

the automatic way in which the market allows the wants of consumers to be made known to producers

56
Q

Incentive

A

Where low or high prices influence consumption and production encouraging buyers to consume and sellers to produce

57
Q

Consumer surplus

A

the difference between the price a consumer is willing to pay for a product and its market price

58
Q

Producer surplus

A

the difference between the price the producer is willing to accept and what is actually paid.

Economics (11 decks)

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