Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

MN10070 > Topic 2 > Flashcards

Topic 2 Flashcards

1
Q

What is a competitive market?

A

One which has many buyers and sellers and no single buyer or seller can influence the price. The producers offer items for sale only if the price is high enough to cover their opportunity cost.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What is money price?

A

The no. of £’s that must be given up in exchange for a good/service.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What is relative price?

A

The ratio of one price to another (opportunity cost).

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What is the quantity demanded of a good?

A

The quantity demanded of a good is the amount that consumers plan to buy during a particular time period at a particular price. This isn’t always the quantity actually bought, as sometimes the quantity demanded is greater than the no. of available goods so therefore the quantity bought is less than the quantity demanded.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What does the law of demand state?

A

When other factors stay the same, the higher the price of a good, the smaller is the quantity demanded.

= downwards sloping demand curve.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What is the substitution effect?

A

When the price of a good rises, other things remaining the same, it’s relative price (opportunity cost) rises. As this increases, the desire to economise and switch to a cheaper alternative becomes stronger.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What is the income effect?

A

As the price of a good falls (rises) a consumers real income rises (falls), allowing the consumer to buy more (less) units of all goods.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What is demand?

A

Demand refers to the relationship between the price of a good and the quantity demanded of that good.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What does a demand curve show?

A

The relationship between the quantity demanded of a good, and its price, when all other factors remain the same. (x = quantity demanded, y = price).

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What is a demand schedule?

A

It lists the quantities demanded at each price, when all the other influencing factors remain the same.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What causes a change in demand?

A

When any factor that influences buying plans changes, other than the price of a good, the demand changes.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What happens when demand rises?

A

The demand curve shifts to the right and the quantity demanded at each price is greater.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What is a measure of marginal benefit?

A

The willingness and ability to pay.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What factors bring a change in demand?

A 
1 = Prices of relative goods.
2 = Expected future prices
3 = Income
4 = Expected future incomes + credit
5 = Population 
6 = Preferences
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

How does the prices of related goods affect demand?

A

A good substitute is a good that can be used in place of another, if a substitute is cheaper then consumers will buy more of the alternative.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What is a complement good?

A

A good that is used in conjunction with another good.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

How do expected future prices affect demand?

A

If the expected price of a good rises for the future, and the good can be stored then the opportunity cost of getting the good now is lower today than it will be in the future.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

How does income affect demand?

A

When income increases consumers buy more of most goods, and when income decreases they buy less.

Normal good = increasing income, increasing demand
Inferior good = increasing income, decreasing demand

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

How do expected future incomes and credit affect demand?

A

When expected future income increases or credit becomes easier to obtain, demand for a good might increase.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

How does population affect demand?

A

Larger population = greater demand for all goods and services

Also, the larger the proportion of the population in a given age group, the greater the demand for the goods/services used by that age group.

21
Q

How do you show a change in quantity demanded on a demand curve?

A

A point on the demand curve shows the quantity demanded at a given price, so it is a movement along the demand curve.

22
Q

How do you show a change the demand on a demand curve?

A

A shift of the whole curve to the left or right.

23
Q

What does a firm need to supply a good?

A 
1 = The resources and technology to produce it
2 = Can profit from producing it
3 = Plans to produce it + sell it.
24
Q

What is the quantity supplied of a good?

A

The amount that producers plan to sell during a given time period at a particular price.

25
Q

What does the law of supply state?

A

Other factors remaining the same, the higher the price of a good, the greater is the quantity supplied.

26
Q

What happens to quantity supplied if price increases?

A

As the price increases, the quantity supplied increases. This is because marginal cost increases, as the quantity produced of any good increases, the marginal cost increases.

27
Q

What is marginal cost?

A

The opportunity cost of producing one more unit of it.

28
Q

What is supply?

A

Supply is the entire relationship between the price of a good and the quantity supplied of it.

29
Q

What is quantity supplied?

A

A point on the supply curve.

30
Q

What does a supply curve show?

A

The relationship between the quantity supplied of a good and its price, when all other influencing factors remain the same.

31
Q

What is a supply schedule?

A

It lists the quantities supplied at each price, when all the other influences stay the same.

32
Q

What is the minimum supply price?

A

The supply curve can be classed as a minimum supply price curve, which shows the lowest price at which someone is willing to sell the good. This lowest price = marginal cost.

33
Q

What six factors affect supply?

A 
1 = Prices of factors of production
2 = Prices of related goods produced
3 = Expected future prices
4 = The No. of suppliers
5 = Technology
6 = State of nature
34
Q

How do prices of factors of production affect supply?

A

If the price of a factor of production rises, the lowest price that a producer is willing to accept for that good rises, so supply decreases.

35
Q

How do prices of related goods affect supply?

A

Firms will sub to use substitutes in production, which are goods that can be produced by using the same resources.

36
Q

How do expected future prices affect supply?

A

If it rises, the return from selling the good in the future increases and its higher than today. This means supply decreases today and increases in the future.

37
Q

How do the number of suppliers affect supply?

A

The larger the no. of firms that produce a good, the greater the supply of a good.

38
Q

How does technology affect supply?

A

A technology change occurs when a new method is discovered that lowers the cost of producing a good.

39
Q

How does the state of nature affect supply?

A

When the weather affects agricultural goods.

40
Q

How is a change in the quantity supplied shown on a supply curve?

A

A point on the supply curve shows the quantity supplied at a given price, a movement along the curve shows a change in the quantity supplied.

41
Q

How is a change in supply shown on the supply curve?

A

The entire supply curve shows supply, a shift of the curve shows a change in supply.

42
Q

What is equilibrium price?

A

The price at which the quantity demanded equals the quantity supplied.

43
Q

What is equilibrium quantity?

A

The quantity bought and sold at the equilibrium price.

44
Q

How does price act as a regulator?

A

When price = too high, the quantity supplied exceeds quantity demanded. When price = too low, the quantity demanded exceeds the quantity supplied.

45
Q

What happens if there is a shortage of goods?

A

PRICE INCREASES

If price = too low, quantity demanded is greater than the quantity supplied, so increasing the price decreases the quantity demanded and increases the quantity supplied.

46
Q

What happens if there is a surplus of goods?

A

PRICES DECREASES

If price = too high, quantity supplied exceeds the quantity demanded, so decreasing the price increases quantity demanded and decreases quantity supplied.

47
Q

What is market demand?

A

The horizontal summation of individual demand curves.

48
Q

What is MR?

A

MR is the addition to Total Revenue (TR) earned

from selling one extra unit of output.

49
Q

Why do supply curves slope upwards?

A

Increasing marginal cost.

MN10070 (9 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions