Topic 2 - Market and Demand Flashcards

1
Q

Market

A

Buyers and sellers voluntarily meet to exchange goods and services

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2
Q

Effective demand

A

When a want or need is met by an ability and willingness to pay.

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3
Q

Latent demand

A

A desire to purchase is not matched by the ability to do so.

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4
Q

Individual demand

A

Relationship between quantity demanded and price by a single individual.

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5
Q

Market demand

A

Total demand for a good or service.

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6
Q

Law of Demand

A

Inverse relationship between price and quantity demanded.

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7
Q

Consumer surplus

A

The difference between the consumers willingness to pay for a commodity and the actual price paid by the,

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8
Q

Conditions of demand ( non-price )

A
Population size
Income
Complementary goods
Taste
Substitute goods
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9
Q

Substitute goods

A

A good in competing demand can be used in place of the other good

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10
Q

Normal good

A

A good of which demand increases as income rises, demand decreases as income falls

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11
Q

Inferior good

A

A good of which demand decreases as income rises and demand increases as income falls

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12
Q

Giffen goods

A

Low income, non-luxury product that defies standard economic law of demand.

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13
Q

Speculative demand

A

If the price of a good is predicted to increase in the future, this may increase the current demand of the good.

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14
Q

Veblen goods

A

These are goods of exclusive or ostentatious consumption

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15
Q

Price elasticity of demand

A

Measures the extent to which the demand for a good changes in response to a change in the price of that good.

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16
Q

Income elasticity of demand

A

Measures the extent to which the demand for a good changes in response to a change in income.

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17
Q

Cross-elasticity of demand

A

Measures the extent to which the demand for a good changes in the price of another good.

18
Q

Formula for PED

A

% change in QD / % change in Price

19
Q

Formula for YED

A

% change in QD / % change in income

20
Q

Formula for XED

A

% change in QD of Good A / % change in price of Good B

21
Q

Complementary good

A

This is a good whose demand increases with the popularity of its complements.

22
Q

Income effect

A

Effect of a change in price on a quantity demanded from a consumer, becoming better or worse off as a result of the price change.

23
Q

Substitute effect

A

Effect of a change in price on quantity demanded, arising from consumer switching to or from alternative (substitute) products.

24
Q

Value if Price Elastic

A

less than -1

25
Q

Value if Price Inelastic

A

between 0 and -1

26
Q

Value if Unitary Elastic

27
Q

Value if Perfectly Inelastic

28
Q

Value if Perfectly Elastic

29
Q

Determinants of PED

A
Amount of Competition
Definition of the market
Addictive products
Luxuries & necessities
Time taken
30
Q

Total Consumer Expenditure

A

Price x Quantity

31
Q

YED is income elastic when…

A

value is greater than 1

32
Q

YED is income inelastic when…

A

value is between 0 and 1

33
Q

Normal good =

A

Negative PED

Positive YED

34
Q

Inferior good =

A

Negative PED

Negative YED

35
Q

Giffen good =

A

Positive PED

Negative YED

36
Q

Veblen good =

A

Positive PED and YED

37
Q

XED Value for close complements =

A

High negative

38
Q

XED Value for remote complements =

A

Low negative

39
Q

XED Value for unrelated products =

40
Q

XED Value for remote substitutes =

A

Low positive

41
Q

XED Value for close substitutes =

A

High positive

42
Q

Determinants of supply =

A
Productivity
Indirect taxes
Number of firms
Technology
Subsidy

Weather
Cost of production