Y12 Booklet 2: Demand, Supply, Equilibria & Surplus Flashcards
What is (effective) demand?
The quantity of a good/service that people are willing (and able) to buy at any given time/price.
What is the Law of Demand?
As price (P) increases, quantity demanded (Qd) decreases
What is Diminishing Marginal Utility?
When the amount of utility gained after consuming a good repeatedly decreases over usage
What is a movement along a demand/supply curve called?
Contraction/Extension
What is the Law of Supply?
As price (P) increases, quantity supplied (Qs) increases
What is the equilibrium?
Where Supply and Demand intersect, and profit is maximised, a.k.a “Market Clearing”
In which types of economy do market forces have an effect?
Free-Market Economy
What are the 4 non-price factors for Demand?
Income
Price of Other Goods
Tastes & Preferences
Expectations of Future
What is a movement of a demand/supply curve called?
Shift Left/Right
What happens to a normal good when income falls?
Demand decreases
What happens to a inferior good when income falls?
Demand increases
What type of demand are Substitute goods in?
Competitive Demand
What type of demand are Complementary goods in?
Joint Demand
What are 4 non-price factors for Supply?
Cost of Production
Taxes
Government Legislation
Availability of Technology
What is Derived Demand?
When demand for a good (e.g. coal) comes from demand for a product of this good (e.g. steel)
What is Composite Demand?
When a good is demanded for 2+ distinct uses
What is Joint Supply?
When an increase in production of a good also increases production of another good (product & by-product, e.g. mutton & sheep-skin)
What is Consumer Surplus?
The money left over for a consumer, when they pay less for a good than they were prepared to
What is Producer Surplus?
The extra money gained by a producer, when they receive more for a good than they were expecting to
