Understanding Markets 2 Flashcards

1
Q

A market is …

A

an arrangement through which buyers and sellers make transactions

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

What are the sides to a market?

A

Demand and supply

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

What are the 4 market dimensions?

A

Location - may not be a specific geographic location

Price - unit price

Quantity

Time

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

What is demand in a product market?

A

amount that consumers

(households) want to buy over a given period in time

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

What 4 factors affect demand

A

– The product’s own price
– The price of other products
– Household incomes
– Consumer tastes/preferences

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

What is the ceteris paribus assumption

A

examine changes in each

factor, assuming other factors do not change

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

What happens to the demand curve of product A if household incomes rise?

A

Shifts right

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

In a product market, supply is

A

the amount that producers

(firms) want to sell over a given period in time

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

Supply depends on what 3 factors

A
  • The product’s own price
    – Production costs and technology
    – The number of firms operating in the market
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What happens to the supply curve if the wage costs fall?

A

Shifts right

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

What happens at equilibrium price?

A

Everyone who wants to buy the good at that price can find a seller willing to sell it

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

At the equilibrium quantity, firms can

A

find a buyer willing to

pay the marginal cost for everything they are producing

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

What happens to price and quantity when something affecting demand changes?

A

Price and quantity change in the same direction

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

What happens to price and quantity when something affecting supply changes>

A

Price and quantity change in opposite directions

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Own-price elasticity of demand is

A

A relative measure of how quantity responds to price changes

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

How to calculate own-price elasticity of demand

A

%change in quantity demanded/ %change in price

17
Q

How does the relationship between quantity and price change in elastic demand?

A

%change in quantity is greater than %change in price

18
Q

How does the relationship between quantity and price change in inelastic demand?

A

%change in quantity is less than %change in price

19
Q

How does the relationship between quantity and price change in unit elasticity?

A

%change in quantity equals %change in price

20
Q

What does inelastic demand imply?

A

A big change in price leads to

a small change in the quantity demanded

21
Q

The own-price elasticity is a negative number, because

A

a change in price leads to a change in demand in the opposite direction

22
Q

Are substitutes positive or negative?

23
Q

Are complements positive or negative?

24
Q

%change in quantity supplied over %change in price is always _____

25
The longer the period of time considered, the greater
the potential responsiveness of supply and demand
26
Why is demand more elastic in the long run?
consumers can adjust their behaviour and switch to alternative products
27
Why is supply more elastic in the long run?
new firms can enter the market, existing firms can adjust their capacity or leave the market
28
The short run is a period during which
the number of firms | operating in the market is fixed
29
How do firms operate in the short run?
with fixed capital capacity | and given technology
30
How can firms adjust production in the short run?
Employing more or fewer workers
31
The long run is a period during which
existing firms can alter capacity, technology can change and firms can enter and leave the industry