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Economics > Unit 2A Market fores > Flashcards

Unit 2A Market fores Flashcards

1
Q

What is demand and supply

A

Demand is the market’s desire to purchase good or services. Supply is the markets ability to produce a good or servce

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2
Q

Define market

A

Where buyers and sellers come together to buy and sell all goods and servies

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2
Q

How do markets work

A

Their prices are determined by market forces the demand and supply. Demand is high supply is low prices will rise, demand is law supply is high prices fall. There’s a market equilibrium where the amount supplied of a g/s is wanted equal to the amount wanted of a g/s prices tend to stay close to the price equilibirium

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3
Q

What’s law of demand

A

as price increases demand will decrease for a product

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4
Q

What’s law of supply

A

as prices increase supply will increase for a product

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5
Q

What’s microeconomics

A

the study of particular markets and sections of economy such as a car industry, food industry, smartphone industry, e.t.c

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6
Q

Who are decision akers in microeconomics

A

households, firms

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7
Q

what people do households include

A

workers, savers, consumers, and buyers

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8
Q

What’s a economic agent

A

decision makers, thus people who influence a economy through buying or selling

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9
Q

aim of the economic agent households

A

consumers want low prices and high quality

workers want good working conditions and high pay

savers want their money to be safe and high interest rates

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10
Q

whats the goal of firms

A

to make as much profit as possible

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11
Q

what’s macroeconomics

A

the study of economics behaviuor and decison making in a whole economy for example canadas economy. japans economy

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12
Q

What does macroeconomics focus on

A

the policies that affect total demand and total supply within the whole economy

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13
Q

what’s the economic agent concerned with macroeconomics

A

government the system that rules a country or region

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14
Q

what does a government. doin economics

A

it produces provides products or services, tax, and regulate the private sector

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14
Q

What are the four market structures

A

perfect competiion, monopolistic competition, oligopoly, and monoply

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15
Q

What’s the market system

A

the most common economic system, it allocated scarce resources through forces of demand and supply

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16
Q

what are the aims of governments

A

a strong and stable economy, full employment of labour, and imporving the performance of individual markets

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17
Q

Charateristics of monopoly

A

when there’s only one firm producing in the market, they have no substitute, and barrier to entry is extremely high such as high costs or legal protection like patents.. extremely high market power to change prices

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17
Q

characteritics of perfect competion structure

A

a extreme where there’s lots of producers, lots of competition so each firms decision is too small to affect the entire market. Each of the sellers will be selling identical products. Also theres a low barrier for entry in this market. no market power

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18
Q

Characteristics of monopolisitc competiton

A

large amount of sellers, low barrier for entry, differs from perfect competition as products produced are slightly different. Products are higherly similar and subsitutatble but not identitcal. Such as different colors, different materials, e.t.c. The differentiations between products give firms a little market power

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19
Q

Characteristics of oligopoly

A

smaller amount of large producers, each with large amount of market power, there’s some level of barrier but not impossibile to enter the industry. The key differentiator is that there’s. a small amount of producers that any decision by a firm will affect the entire market. This makes firms in this market structure codependant on each other.

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20
Q

Law of demand

A

when prices go down more people buy it, where prices go up less people buy it

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21
Q

what’s key to markets effectiveness

A

volunatry exchange, buyers and sellers willingly to make the exchange

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22
Q

law of supply

A

as prices go up farmers can make more profit thus incentivised to produce more, if prices go down he’s not going to want to porduce strawberries

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23
Q

What’s surplus

A

the mismatch of quanitie supllied and quantity demanded where quantity demanded is higher than quanityt demanded.

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24
Q

what occurs in surplus

A

unsold goods, supply curve contracts to incentivise the purchase. ofexcess supply

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25
Q

what shortage

A

mismatch of quanity demanded and quantity supplied where consumers want more then how much the producer is willing or able to supply

26
Q

What is demand

A

the quanityt of a good or service that consuemrs are willing and able to buy at any given price in a particular period of time

26
Q

what occurs in shortages

A

price increase, then supplier will perhaps supply more until prices increase above the market equilibrium and consumers stop buying and then going back to the equilibirum

27
Q

what. arethe reasons for downward demand

A

substituion effect, real income effect, and law of diminishing marginal utility

27
Q

what is quanitty demanded

A

the quanitty of a g/s that consumers are willing and able to buy at a specificed sprice in a particular period of time

27
Q

What causes the shifts of demand curves

A

1) changes in income the higher the income the lower the demand for inferior goods

2) changes in expectations in future price or availability. If we expect there to be a rise in price soon, there will be a shift to the right. But if we expect there to be a shortage soon we will have a higher

3) changes in price and availability of complements if price is falling of complements demand will be higher shifting to right. If complement availbility is high demand will shift to the right

4) changes in price and availability of subsitutes if substitue rises in prices demand will shift to right and if availiability of substitue is low demand will shift to the right

5) if population size increases demand shifts to the right

6) changes in fashion if there’s things that make product more popular demand shifts to the right

28
Q

PEPSI Tastes meaning

A

Population size or distribution
Expectations of price and availbilit
Price of complements
Subsitute price
Income

Tastes in product

28
Q

What causes shifts in demand curve

A

non price factors

29
Q

what causes extensions and contractions

A

price rises and price falls

30
Q

What is a supply

A

the quantity of g/s a producer is willing and able to supply at any price at a specific period of time

31
Q

What is quanity supplied

A

the quantity of g/s a producer is willing and able to supply at any price at a specific period of time

32
Q

law of supply

A

as price increases quantity supplied increases, as price decreases quanitty supplied decreases

33
Q

why does supply curve slope upwards

A

profit motive, if they see there’s a possibility to make more money because of the higher price they will make more

34
Q

what are determinants of supply

A

1) changes in FOP, as FOP price increases supply will shift to the left

2) changes in whether conditions, a more favorable wheater condition supply curve shifts to right

3) changes in technology, the more advanced techonology is more efficient production is being able to make more

4) changes in corporation taxes, as corporation tax increases supply will shift to the left

5) changes in business expectations, if produces expect demand to become higher supply will shift to the right

6) changes in prices of related goods, if prices in related goods are decreasing then supply will shift to the right

35
Q

What is market quilibiruim

A

where quanity demanded and quanitity supplied equal each other

36
Q

How price maechanisms responded to shortage

A

Price Increase: As demand exceeds supply, buyers bid up the price of the good or service, leading to a price increase.
Reduced Demand: As prices rise, some buyers are priced out of the market, reducing demand.
Increased Supply: Higher prices incentivize producers to increase production, as it becomes more profitable to do so.
New Entrants: Higher prices attract new firms to enter the market, increasing supply.
Rationing: Sellers may ration the available supply among buyers, allocating it to those willing to pay the highest price.
Black Markets: In extreme cases, black markets may emerge, where goods are sold illegally at even higher prices.
Equilibrium: Eventually, the price increase reduces demand and increases supply, eliminating the shortage and restoring equilibrium.

36
Q

What is PED

A

Price elasticity of demand the reponsiveness of demand to a change in price

37
Q

What are g/s that are considered inelastic

A

toilet paper: neccesities
drugs: addictive

38
Q

what are g/s that are considered elastic

A

vacations: luxurious goood that can be done without

39
Q

What does it mean if a price is elastic

A

if a product were to increase in price there would be a significant decrease in demand

40
Q

what does it mean if a PED slope is flatter

A

its elastic in demand

41
Q

what does it mean if price is inelastic

A

if a product were to increase in price there would be a minor decrease in demand for it

42
Q

what does it mean if a demand curve PED is steep

A

it should be inelastic

43
Q

What’s perfectly elastic demand shown in a PED curve

A

when it’s parralel to the x axis

44
Q

How to calculate percent change in price

A

new price- orignial price)original price *100

44
Q

what’s perfectly inelastic shown in graph

A

a line parralel to y axis

45
Q

What’s SPLAT

A

determinants of elasticity
Substitutes (number quality)
Proportion of income (the higher the porportion of income the product is the more elastic is)
Luxury if it’s a luxury then it will be more elastic
Adddictiveness (the more addictive it’s more inelastiic)
Time period (the longer the period of time, the higher the prive elasticity of demand

46
Q

How to calculate PED

A

you do the %change in quanitity demanded over percent change in price.

47
Q

How to calculate percent change in quanitty demanded

A

new quanity-original quanity)divided by original quatity *100

48
Q

What is cosidered elastic, unit elastic, and inelastic for PED

A

For PED ignore the negative sign

Elastic g/s has a PED larger than 1

Unit elastic has a PED of 1

Inelastic g/s has a PED smaller than 1

49
Q

How do firms use PED

A

Decide on pricing strategy, understand impacts on reneue

50
Q

How do governments use PED

A

set tax policies which goods to tax whether it would be affective also the revenue from tax

50
Q

If a inelastic g/s rises in price what will happen

A

there will be a slight decrease in quantity demanded but total revenue shall increase

51
Q

If a elastic g/s rises in prices what will happen

A

quanitty demanded decreases significantly and total revenue reduces

52
Q

What are perfectly elastic supplies

A

where an increase in price can be met examples are golds or jewel

53
Q

what are perfectly inelastic supply

A

where supply is fixed and price increasing. such as concert tickets

54
Q

what is price elasticity of supply

A

the responsiveness of supply to a chagne in price

55
Q

What determinats affect PES

A

FLATS

56
Q

What does FLATS stand for

A

Factor mobility (more occupationally mobile resources used are the more elastic PES is)
Level of capacity of firm (more capable more elastic)
Availability of resources (more available more elastic)
Time to produce goods (less time needed indicates elasticity)
Storage possibilities (the increase of storage possibilities) indicates elasticity

57
Q

What’s the importance of PES

A

Firms have profit incentitve thus wanting to make themselves as elastic as possible to maximise sales revenue and profit but also to shift production away ot minimise losses.

primary sector firms would want to see if price changes are more consistent beofre increasing production

governments will want to increase the PES so they can allocate resources more efficiently

58
Q

how does market failure occur

A

Market failure occurs when the market fails to allocate resources efficiently, leading to a decrease in economic welfare and social well-being.

Economics (5 decks)

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