them 1: microeconomics Flashcards
Mass Market
The ‘mainstream’ of the market. Products are more general and less specific.
market
Any place where buyers meet suppliers to exchange goods/services.
good
a good is just another word for a product
demand
Demand is the quantity of a good/service that consumers
are willing and able to buy at a given price.
a demand curve
A demand curve
shows the relationship between price and quantity
Contraction/Extension
A movement along the demand curve can be caused by a change in price only
PASIFIC
population, advertisement, supplementary goods, income, fashion and trends, interest rates, complementary goods
supply
Supply is the quantity of a good/service that producers are willing and able to supply at any given price.
PINTSWC
Productivity, Indirect taxes, Number of firms, Technology,
Subsidies, Weather, Cost of Production
Equilibrium
Equilibrium Price and Quantity Bought and Sold is reached where Supply and Demand is Balanced. At this price the market clears as there are no consumers or suppliers left willing but unable to buy or sell at that price.
Excess
Demand
Excess Demand occurs when thePrice of a good is lower than the Equilibrium Price, meaning more consumers will want to buy the good than suppliers are willing to sell. The difference between the Quantity Demanded (QD) and the Quantity Supplied (QS) is the Excess Demand. caused by an increase in demand or a decrease in supply.In either case there will be excess demand until prices are increased, at which point the market will clear.
Excess
Supply
Excess Supply occurs when the Price of a good is higher than the Equilibrium Price, meaning more suppliers will want to sell the good than consumers are willing to buy. The difference between the Quantity Demanded (QD) and the Quantity Supplied (QS) is the Excess Supply.
Price Mechanism (invisible hand)
The system in which the forces of demand and supply
determine the optimum price and quantity of a good to be bought and sold.
the 3 functions of the price mechanism
Signalling: Changing prices tell consumers and producers to buy and sell more or less of a product
Incentives: Changing prices tell suppliers to produce more or less of a product
Rationing: When there is a shortage of a product, the price rises and deters some consumers from buying the good
Perfect
Information
All economic agents are perfectly aware of the changing price and quantity bought and sold of all goods.
