Unit 3 - Price Determintion In A Competitive Market Flashcards
Market
A voluntary meeting of buyers and sellers with exchange taking place
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
Supply
The quantity of a Good or service that producers are willing and able to sell at given prices in a given period of time
Competitive markets
Markets in which the large number of buyers and sellers possess good market information and can easily enter or leave the market
Ruling market price (equilibrium price)
The price at which planned demand equals planned supply
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
Individual demand
The quantity of a good or service that a particular consumer or individual is willing and able to buy at different market prices
Condition of demand
A determinant of demand, other that the goods own Price, that fixes the position of the demand curve
Substitute goods
Alternative goods that could be used for the same purpose
Complementary goods
When two goods are complements, they experience joint demand
Increase in demand
A rightward shift of the demand curve
Decrease in demand
A leftward shift of the demand curve
Normal good
A good for which demand increases as income rises and demand decreases as income falls
Inferior good
A good for which demand decreases as income rises and demand increases as income falls
Elasticity
The proportionate responsiveness of a second variable to an initial change in the first variable
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
Short run
The time period in which at Elat one factor of production is fixed and cannot be varied
Long run
The time period in which no factors of production are fixed and in which all the factors of production can be varied
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 dividing the percentage change in quantity demanded by the percentage Change in income
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 of another good
Market supply
The quantity of a good or service that all the firms in a market plan to sell at given prices in a given period of time
Profit
The difference between total sales revenue and total costs of production
Total revenue
All the money received by a firm from selling its total output
Condition of supply
A determinant of supply,other than the goods own price, that fixes the position of the supply curve
Increase in supply
A rightward shift of the supply curve
Decrease in supply
A leftward shift of the supply curve
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
Equilibrium
A state of rest or balance between opposing forces
Disequilibrium
A situation in which opposing forces are out of balance
Market equilibrium
A market is in equilibrium when planned demand equals planned supply, where the demand curve crosses the supply curve
Market disequilibrium
Existsts at any price other than equilibrium price, when either planned demand < planned supply or planned demand > planned supply
Excess supply
When firms wish to sell more than consumers wish to buy, with the price above the equilibrium price
Excess demand
When consumers wish to buy more than firms wish to sell, with the price bellow the equilibrium price
Joint supply
When one good is produced, another good is also produced from the same raw materials, perhaps as a by-product
Composite demand
Demand for a good which has more than one use,which means that an increase in demand for one use of the good reduces the supply of the good for an alternative use. It is related to the concept of competing supply
Derived demand
Demand for a good or factor of production, wanted not for its own sake, but as a consequence of the demand for something else.
