Unit 2- Competitive Demand Flashcards
Define competitive market
A market in which the large number of buyers and sellers posses good market information and can easily enter or leave the market
Define Equilibrium price
The price at which planned demand is exactly equal to planned supply
Supply define
The quantity of a good or service that firms are willing and able to sell at a given prices in a given period of time
Demand
The quantity of a good or service that consumers are willing and able to buy at given prices in a given period of time. For economists demand is always effective demand.
Effective demand define
The desire for a good or service backed by an ability to pay
Define market demand
The quantity of a good or service that all the consumers in a market are willing and able to buy at different market prices
Define condition of demand
A determinant of demand other than the goods own price that fixes the position of the demand curve
Define Increase in demand
A rightward shift of the demand curve
Define Decrease in demand
A leftward shift in the demand curve
Main conditions of demand
Price of substitute goods
Price of complementary goods
Personal income
Tastes and preferences
Define normal good
A good for which demand increases as income rises and demand decreases as income falls
Define and inferior good
A good for which demand decreases as income rises and demand increases as incomes fall
Elasticity define
The proportionate responsiveness of a second variable to an initial change in the first variable
Define price elasticity of demand
Measures the extent to which the demand for a good changes in response to a change in the price of that good
Income elasticity of demand
Measures the extent to which the demand for a good changes in response to a change in income: it is calculated by Qchange%
Pchange%
Cross elasticity of demand
Measures the extent to which the demand for a good changes in response to a change in the price of another good; it is calculated by dividing the percentage change in quantity demand by the percentage change in the price of another good
Define market supply
The quantity of a good or service that all firms plan to sell at given prices in a given period of time
Define profit
The difference between the total sales revenue and total costs of production
Define total revenue
The money a firm receives from selling its output calculated by multiplying the price by the quantity sold
Conditions of supply
Determinants of supply other than a goods own price that fix the position of the supply curve
Main conditions of supply
Production costs Wage costs Raw material cost Energy cost Borrowing costs
Increase in supply causes
Rightward shift in the supply curve
Decrease in supply causes
A leftward shift of supply curve
Define price elasticity of supply
Measures the extent to which the supply of a good changes in response to a change in the price of that good
Define equilibrium
A state of rest or balance between two forces
Disequilibrium
Where there is excess supply or excess demand
Market disequilibrium
There is either excess supply or demand. Excess demand causes prices to rise while excess supply causes them to fall
Excess supply
When firms wish to sell more than consumers want to buy with the price above the equilibrium price
Excess demand
When consumers wish to buy more than firms wish to sell below market equilibrium price
Joint supply
When one good is produced another good is also produced from the same raw materials
Competing supply
When raw materials are used to produce one good they cannot be used to produce another
Complementary goods
A good in joint demand or a good which is demanded at the same time as other goods
Substitute goods
A good in competing demand, namely a good which can be used in place of the other good
Composite demand
Demand for a good which has more than one use
Derived demand
Demand for s good which is an input into the production of another good
Allocative efficiency
Occurs when the available economic resources are used to produce the combinations of goods and services which best matches people’s tastes and preferences
Productive efficency
For the economy as a whole occurs when it is impossible to produce more of one good without producing less of another// for a firm it occurs when the average total cost of production is minimised
Merit good
A good which when consumed leads to benifits which other people can enjoy or a good for which the long term benifit of consumption exceeds the short term benifit enjoyed by the person consuming the merit good// value judgements determine if something is a merit good
