Unit 2- Competitive Demand

Question 1

Define competitive market

Answer 1

A market in which the large number of buyers and sellers posses good market information and can easily enter or leave the market

Question 2

Define Equilibrium price

Answer 2

The price at which planned demand is exactly equal to planned supply

Question 3

Supply define

Answer 3

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

Question 4

Demand

Answer 4

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.

Question 5

Effective demand define

Answer 5

The desire for a good or service backed by an ability to pay

Question 6

Define market demand

Answer 6

The quantity of a good or service that all the consumers in a market are willing and able to buy at different market prices

Question 7

Define condition of demand

Answer 7

A determinant of demand other than the goods own price that fixes the position of the demand curve

Question 8

Define Increase in demand

Answer 8

A rightward shift of the demand curve

Question 9

Define Decrease in demand

Answer 9

A leftward shift in the demand curve

Question 10

Main conditions of demand

Answer 10

Price of substitute goods
Price of complementary goods
Personal income
Tastes and preferences

Question 11

Define normal good

Answer 11

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

Question 12

Define and inferior good

Answer 12

A good for which demand decreases as income rises and demand increases as incomes fall

Question 13

Elasticity define

Answer 13

The proportionate responsiveness of a second variable to an initial change in the first variable

Question 14

Define price elasticity of demand

Answer 14

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

Question 15

Income elasticity of demand

Answer 15

Measures the extent to which the demand for a good changes in response to a change in income: it is calculated by Qchange%
Pchange%

Question 16

Cross elasticity of demand

Answer 16

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

Question 17

Define market supply

Answer 17

The quantity of a good or service that all firms plan to sell at given prices in a given period of time

Question 18

Define profit

Answer 18

The difference between the total sales revenue and total costs of production

Question 19

Define total revenue

Answer 19

The money a firm receives from selling its output calculated by multiplying the price by the quantity sold

Question 20

Conditions of supply

Answer 20

Determinants of supply other than a goods own price that fix the position of the supply curve

Question 21

Main conditions of supply

Answer 21

Production costs
Wage costs
Raw material cost
Energy cost
Borrowing costs

Question 22

Increase in supply causes

Answer 22

Rightward shift in the supply curve

Question 23

Decrease in supply causes

Answer 23

A leftward shift of supply curve

Question 24

Define price elasticity of supply

Answer 24

Measures the extent to which the supply of a good changes in response to a change in the price of that good

Question 25

Define equilibrium

Answer 25

A state of rest or balance between two forces

Question 26

Disequilibrium

Answer 26

Where there is excess supply or excess demand

Question 27

Market disequilibrium

Answer 27

There is either excess supply or demand. Excess demand causes prices to rise while excess supply causes them to fall

Question 28

Excess supply

Answer 28

When firms wish to sell more than consumers want to buy with the price above the equilibrium price

Question 29

Excess demand

Answer 29

When consumers wish to buy more than firms wish to sell below market equilibrium price

Question 30

Joint supply

Answer 30

When one good is produced another good is also produced from the same raw materials

Question 31

Competing supply

Answer 31

When raw materials are used to produce one good they cannot be used to produce another

Question 32

Complementary goods

Answer 32

A good in joint demand or a good which is demanded at the same time as other goods

Question 33

Substitute goods

Answer 33

A good in competing demand, namely a good which can be used in place of the other good

Question 34

Composite demand

Answer 34

Demand for a good which has more than one use

Question 35

Derived demand

Answer 35

Demand for s good which is an input into the production of another good

Question 36

Allocative efficiency

Answer 36

Occurs when the available economic resources are used to produce the combinations of goods and services which best matches people’s tastes and preferences

Question 37

Productive efficency

Answer 37

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

Question 38

Merit good

Answer 38

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