Unit-1 The Competitive Market Flashcards
What is a monopoly?
One firm selling in a market.
What is a competitive market?
A situation where there are many buyers (demand) and sellers (supply).
What is a monopoly power?
When a firm has more than 25% of the market.
What is demand?
The quantity buyers are willing and able to buy at a given price in a given period of time.
What is effective demand?
The consumer must be willing and able to buy the products.
What is the contraction of demand?
The fall in quantity demanded due to a rise in price.
What is the extension of demand?
The increase in quantity demanded due to a fall in price.
What is the shift in demand?
Demand increase due to factors other than prices-PASIFIC.
What does PASIFIC stand for?
P-opulation A-dvertising S-ubstitute goods I-ncome F-ashion I-nterest rates C- omplementary goods
What are inferior goods?
Goods for which the demand falls when income rises.
What is elastic demand?
The quantity demanded changes at a greater rate than price (PED greater than 1)
What is inelastic demand?
The quantity demanded changes at a lesser rate than price (PED less than 1)
What is unit elastic demand?
The quantity demanded changes at the same rate as the price (PED=1)
What is total revenue?
The amount of money a firm receives when selling its products.
How do you calculate total revenue?
Price x quantity sold
What is supply?
The quantity a producer is willing and able to produce at a given price level in a given period.
What is the extension in supply?
The increase in quantity supplied due to a rising price.
What is the contraction in supply?
The decrease in quantity supplied due to a falling price.
What is the shift in supply?
Supply increases due to factors other than price- PINTSWC
What is productivity?
Output per worker per period of time.
What are subsidies?
A payment given to a firm, usually by the government.
What is price elasticity of supply?
The responsiveness of quantity supplied to a change in price.
What is inelastic supply?
He quantity supplied changes at a lesser rate than price (PES less than 1)
What is elastic supply?
The quantity supplied changes at a greater rate than price (PES greater than 1)
What is the equilibrium?
The point where demand and supply meet-the market clearing price.
What is specific tax?
A tax placed in a good or a service which is a specific amount of money per unit bought.
What is ad valorem tax?
A tax placed on a good or a service which is a percentage of a price.
What is the minimum price?
A price set above the equilibrium and the price is not allowed to go below it.
What is the maximum price?
A price set below the equilibrium and the price is not allowed to go above it.
What are the determinants of supply?
Productivity Interest rates Number of firms entering the market Technology Subsidies Weather Cost of production
