The theory of a market Flashcards
What do all markets have in common?
All buyers and sellers come in contact for the purpose of exchange.
What is a market?
A market is where consumers and producers come to contact to exchange goods and services.
What are consumers assumed as?
Rational decision makers.
What does rational decision makers mean?
A rational decision maker means they allocate there income to maximise there utility from goods and services they bought.
what is the demand?
The demand for a good or service is the quantity consumers are willing and have the ability to buy at a given price at a given time.
What is the basic law of demand?
Is that demand varies inversely to price - the lower the pri
What does a higher price leads to?
Contraction of demand
What does a lower price leads to?
Extension of demand
What effects the change in price?
-income effect : a decrease in price leads to greater consumer purchase as they have larger budget.
-substitution effect : a fall in price of good x is relatively cheaper than other substitutes.
What are changes in the demand curve?
-interest rates
-effects of advertising and marketing
-changes in price of subustitutes.
What is utility?
Utility is the measure of satisfaction
What is marginal utility?
A marginal utility is the change in satisfaction from consuming extra unit.
What is seasonality refer to?
Seasonality refers to fluctuations of outputs and sales due to the seasonal year e.g easter eggs,summer fruits and winter clothing
